EN speaks to Tony Walsh about Laterooms' sale to First Choice

The shareholders of LateRooms.com were considering a stock market listing before trade buyer First Choice Holidays came in with its £108 millionplus offer, according to development director and cofounder
Tony Walsh.

“We had sounded out the prospect of a float and were told it was a strong possibility, but when you start to go down that route you put your head above the parapet and people become aware you’re up for offers,” he tells EN.
“The corporate financiers and advisors get to find out and they deal with exactly the same type of clients who are interested in buying you.”

Bids for the business began to flood in, he continues, “and it basically became an auction process”.

After whittling it down to a few “very interested parties”, the vendors settled on First Choice. The deal provides an exit for private equity house ECI Partners, which had backed the initial £25 million management buyout of the internet hotel booking business in December 2004. First Choice has acquired 100 per cent of the company’s equity, of which 55 per cent was held by ECI.

Founding brothers Paul, Steve and Tony Walsh and CEO Charles Allen, who led the 2004 MBO, each held just over 10 per cent of the equity while finance director Chris Morris had a stake of just over two per cent and non-executive chairman John Donaldson owned a touch over 2.5 per cent.

Paul and Steve Walsh had both retired from the Manchester-based business at the time of the original MBO. The existing management team of Tony Walsh, Allen and Morris will continue with business – which employs 198 staff and is to be run as an independent subsidiary – for at least three years to complete an earn-out that could see the final price paid for the business increase from the initial consideration of £108 million to £120 million.

“Essentially they’re buying the management as, without us, there isn’t much of a business,” Walsh says.

That business is estimated to have generated earnings before interest, tax and amortisation of £6.2 million in 2006, handling the bookings of around 1.3 million room nights across more than 13,000 hotels. The purchaser expects this figure to grow: it estimates that the UK online hotel booking market will expand by 21 per cent annually for the
next few years.

“First Choice can now act as a catalyst and help us to move further into the EU,” Walsh continues. “It already has something like 12,000 hotels throughout Europe on its books and we can crosssell services for those – we haven’t got to go out and sign them up or open lots of new offices.”

The shareholders of LateRooms were advised on the deal by Close Brothers Corporate Finance and Eversheds solicitors.

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