AMR Corp.'s Sabre Unit Files for $550 Million Stock Offering
Aug. 08, 1996
DALLAS (AP) _ American Airlines' parent company announced plans Thursday to sell part of its reservations system, Sabre Group Holdings Inc., taking a step toward giving the technology business its independence.
The Sabre unit of AMR Corp. registered with the Securities and Exchange Commission for an initial public offering of up to $550 million in stock. It did not say how many shares will be sold in the long-anticipated spinoff. The price of shares typically is set close to the sale date.
AMR, the Fort Worth, Texas-based parent of American Airlines, will retain 82 percent of Sabre by keeping all of the unit's Class B voting stock, said Michael Durham, Sabre's president and chief executive.
Sabre currently operates three businesses: travel reservations serving nearly 30,000 travel agencies; data processing; and interactive services. It faces growing competition for consumers making travel arrangements through online services, the Internet and other companies.
Durham, a former chief financial officer at AMR, said Sabre's mission won't change despite the spinoff.
What will change is the company's ability to compare itself to publicly traded competitors, he said.
``We've had very steady earnings growth and very stable cash flow for many years, but our rate of growth has been lower,'' Durham said. ``This will be added impetus for the Sabre group to grow at an increasing rate, either through acquisitions or also through other leading-edge travel and information technology companies.''
The companies have not determined what fraction of the IPO's proceeds will be used to repay Sabre's $850 million debt to AMR, Durham said.
``That'll depend in part on how much cash the Sabre Group thinks it needs to meet its business requirements,'' he said.
Airline industry analyst Raymond E. Neidl at Furman Selz said he believes both companies will benefit.
AMR can use the capital, and Sabre likely will gain in the stock market, he said.
Eventually, AMR will likely sell its interest in Sabre because the reservations business is no longer the competitive edge for an airline it once was, Neidl predicted.
In early July, AMR completed its reorganization of the Sabre unit, separating it from American Airlines into a subsidiary. Sabre's pretax earnings of $370 million last year represented 44 percent of AMR's total profits for the year on only 9.4 percent of the company's total revenue.
News of the planned stock sale plans was well-received by investors. In Thursday trading on the New York Stock Exchange, AMR shares rose $4.50 to close at $86.25 a share.