US private equity targets Lastminute.com owner

The prospect of a bidding war for the travel reservation firm Sabre Holdings, the US owner of the lastminute.com and Travelocity websites, sent its shares soaring yesterday.

Sabre is understood to be in advanced talks with a consortium of private equity bidders led by Texas Pacific and Silver Lake Partners. Other bidders have also been linked to the group, including Apollo.

Its shares jumped 7.5 per cent in New York. The company's market capitalisation was $3.7bn (£1.9bn) on Friday before news of a potential deal broke. Lastminute.com was bought out by the US firm's subsidiary, Travelocity Europe, last year for £577m in a deal which netted its founders Brent Hoberman and Martha Lane Fox £40m. Mr Hoberman stayed on as head of the enlarged Travelocity group.

Analysts have been predicting further consolidation and indicated this deal could reshape an industry that has already undergone enormous change. Last week, the US firm Travelport, which owns CheapTickets.com, snapped up Worldspan, which operates reservation systems for airlines.

Private equity firms are flush with cash and are estimated to raise a record $300bn this year for their investment funds. Many are turning to cash-rich industries to make their money work quickly and have been on the hunt for everything from technology and travel to health care.

They are attracted to the reservation business because of the steady cash flow although the industry has been under pressure. Sabre, which is based in Southlake, Texas, and employs 9,000 people in 45 countries, dates back to the 1960s when it became the first company to create computerised information systems for airline reservations. Acting as middleman between travel agents and airlines, hotels and rental car companies it became a central point for information for travel products.

However, as consumers turned to the internet to find cheap fares and companies sold direct online to travellers without the need for a broker, Sabre found itself less in demand and it expanded its online travel products to maintain its prominance. It also provides reservation systems for travel agents and has several deals with major US airlines.

A spokesman for Sabre said he could not comment on market speculation.