Flight Centre Limited announces Liberty Travel acquisition and $100 million capital raising



    VANCOUVER, Nov. 11 /CNW/ - FLIGHT Centre Limited (FLT) has fast-tracked
its global expansion by agreeing to acquire one of the United States' largest
and most recognised travel agency groups.
    The $US135million acquisition of privately-held Liberty Travel will
transform North America into FLT's largest international market outside of
Australia by sales and will:

    
    -  Deliver a profitable business with a track record of total transaction
       value (TTV) growth
    -  Provide immediate scale in the key North American market, with the
       addition of 193 leisure travel shops along the East Coast, Florida and
       Chicago, plus 40 wholesale locations in 22 states
    -  Bolster the company's existing leisure operations, which are
       predominantly located on the US West Coast and in Canada, and provide
       a footprint for further leisure, wholesale and SME corporate travel
       growth
    -  Strengthen FLT's global product offering and relationships with key
       suppliers.

    Total transaction value from Liberty and FLT's existing leisure, corporate
and wholesale travel businesses in the United States will exceed $US2billion
per year, making the combined FLT and Liberty business the USA's:

    -  10th largest travel group overall;
    -  Second largest bricks and mortar leisure agency behind the AAA Travel
       group and;
    -  Largest wholly-owned retail and wholesale leisure travel business
    

    The acquisition is FLT's largest to date and at $US135m represents an
estimated multiple of 6.8 times Liberty's unaudited pro forma earnings before
interest, tax, depreciation and amortization of $US19.9million(1) for the 12
months ended June 30, 2007.
    The acquisition is expected to be earnings per share accretive in FY2009
on a pro-forma basis. The acquisition is subject to usual closing conditions
and to key regulatory approvals and consents being obtained. It is expected to
complete in January 2008.
    In connection with the Liberty acquisition, FLT will raise $A100million
through a Share Placement to be conducted via an institutional bookbuild. The
placement will be launched November 12th and will be led by ABN AMRO Morgans.
    In conjunction with the institutional placement and in line with their
stated intention to reduce their overall holdings in FLT without surrendering
control, FLT's founders have elected to sell up to 2.6million FLT shares in
the same institutional bookbuild.
    At the completion of the placement and selldown, FLT retail investors
will be given the opportunity to subscribe for up to $5,000 of FLT shares via
a Share Purchase Plan.
    The company also intends to undertake a review of its capital structure
going forward with a view to enabling the introduction of greater levels of
debt to fund future acquisitions and optimise the company's capital structure.

    Liberty Travel

    Liberty Travel, credited with the invention of the packaged vacation, was
founded by Fred Kassner and Gilbert Haroche in 1951. The Kassner and Haroche
families have to date maintained their leadership and ownership roles in the
company.
    Liberty serves more than 2million customers annually through its retail
shop network and an additional 18,000 travel agencies via its wholesale
business, GOGO Worldwide Vacations.

    Acquisition Rationale

    FLT managing director Graham Turner said the acquisition came after
extensive due diligence and would produce significant benefits for Flight
Centre Limited and its shareholders.
    "We are excited to work with Liberty's management to seize the
opportunities created in the large and dynamic North American travel market,"
Mr Turner said.
    "With the addition of Liberty, FLT will gain a strong network of branches
with an affluent client base, access to niche product offerings and an
experienced management team.
    "The acquisition is directly aligned with Flight Centre's strategic goals
for growth and fast-tracks the business's evolution in this key market, as it
would have taken years of organic growth and major financial investment to
achieve Liberty Travel's results, size and market penetration.
    "From an overall company perspective, the addition of Liberty is very
significant.
    "Firstly, access to GOGO's wholesale product range, particularly its core
Caribbean and Americas offerings, will strengthen FLT's global product
platform, which is a key strategic objective for the company.
    "Secondly, FLT will now have an iconic and profitable leisure travel
business in the USA to complement its successful and rapidly expanding FCm
Travel Solutions corporate travel business.
    "Thirdly, the acquisition significantly strengthens FLT's overseas
operations and reaffirms the company's position as one of the world's largest
travel businesses. Based on Liberty's expected results moving forward, more
than half of FLT's annual total transaction value will now come from
off-shore."

    
    Growth opportunities in the short-term include:

    -  Expanding the GOGO Worldwide Vacations wholesale business and product
       range
    -  Improving retail shop performance by building on Liberty's traditional
       strengths and introducing some key elements of the FLT business model,
       particularly in the contracting and marketing areas, to capitalize on
       ongoing TTV growth
    -  Securing a larger share of the middle market as growth in the online
       sector slows
    

    The acquisition will also allow FLT to utilise tax losses incurred from
its existing United States businesses.

    Leadership Team

    Following the acquisition, Liberty Travel will be managed as part of
FLT's North American business, which is headed by Greg Dixon, and will be
jointly led by Sue Rennick and Cathy Pelaez during the integration period. Ms
Rennick has worked for Flight Centre for 19 years in a variety of senior
positions, including leader of Flight Centre brand in Australia and president
of the company's West Canada operations. Ms Pelaez, Liberty Travel's current
chief operating officer, will take on the role of president Liberty Travel. Ms
Pelaez is a 27-year veteran of the organisation and has held various executive
positions throughout her career. In addition, other key Liberty executives
will continue with the business.

    USA Leisure Travel Market Conditions

    While online agencies are currently the largest operators in the US
leisure travel market, FLT believes there are reasonable growth opportunities
within the offline sector for a business of its size post Liberty's
acquisition.
    Mr Turner said while economic factors such as the sub prime housing
crisis and the relative weakness in the US dollar had affected the overall
leisure travel market, some positive signs were emerging in the
$180billion-a-year leisure sector.
    "Travel agency revenue is increasing - albeit slowly - and indications
are that spending will increase in upcoming years as America's Baby Boomers
take off to explore the world and Generations X and Y enter their peak earning
years," he said.
    "This creates opportunities for larger service-focused agencies, as these
people are generally time-poor, have relatively high disposable incomes and
have a desire to venture further afield.
    "Recent changes to passport regulations, which mean more Americans now
have passports, are also likely to increase international leisure travel
traffic in the medium and longer terms."

    Recap on Expected FLT Performance

    News of the Liberty acquisition follows upgraded profit guidance from FLT
for 2007/08.
    Following a strong start to the year, the company has announced that it
expects to report 40% growth in net profit before tax for the first half, in
comparison to a relatively weak previous corresponding period.
    Excluding any acquisition-related benefits attributable to Liberty, FLT
expects a minimum of 15% pre tax profit growth (excluding the abnormal gain
recorded during 2006/07) for the full year.
    The company is currently tracking at the top end of its guidance of
10-15% TTV growth.
    Mr Turner said a number of factors had fuelled the healthy TTV growth
globally including:

    
    -  More consistent approach to mark ups in retail and corporate offices
    -  Improved gross margin through smarter approach and better performance
       to major contracts
    -  More productive selling environment for staff via the international
       roll out of the Shop of the Future design
    -  Development of fresh marketing campaigns - "Unbeatable" and "Perfect
       Holiday Promise"
    -  Improved incentive structures for sales staff
    -  Strong discipline on cost of seat business model
    -  Improved higher margin land sales
    -  Corporate travel growth, particularly SME segment
    

    FLT is advised by the Blackstone Group, Caliburn, PriceWaterhouseCoopers
and Bracewell & Giuliani. Lehman Brothers acted as the financial advisor and
Lowenstein Sandler PC acted as the legal advisor to Liberty Travel.

    ----------------------
    (1) EBITDA as calculated by FLT. Liberty's financial year ends
    December 31.





For further information:

For further information: Enquiries to: Haydn Long, Flight Centre
Limited, +61 418 750454; Allison Eaton (North America), Communications
Manager, (604) 202-0872

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FLIGHT CENTRE NORTH AMERICA

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