Prosus buys Despegar for $1.7B, taking a bite out of Latin America's travel sector

Core Viewpoint - The travel sector is experiencing a significant rebound post-Covid-19, highlighted by Prosus's acquisition of Despegar for $1.7 billion, aimed at expanding its operations in Latin America [1][2]. Company Overview - Despegar is one of the largest online travel agencies in Latin America, publicly traded on the NYSE with a market cap of $1.24 billion as of last Friday [2]. - The company has been operational since 1999 and also controls Decolar, another major travel brand in Brazil [4]. Financial Details - Prosus will pay $19.50 per share for Despegar, representing a 33% premium over its recent market price, although this is lower than Despegar's market cap on its first trading day in 2017 [2]. - Despegar reported approximately $5.3 billion in gross bookings, $706 million in revenue, and an EBITDA of $116 million for the full year 2023 [5]. Strategic Intent - Prosus aims to leverage Despegar to achieve greater economies of scale in Latin America, where GDP is expected to grow by 2-3% next year [6]. - The acquisition is part of Prosus's strategy to create a high-quality ecosystem of complementary businesses, enhancing Despegar's growth through its extensive customer touchpoints [2]. Market Position and Competition - Despegar competes with other travel brands like Hotel Urbano and operates in 19 different markets, offering both direct-to-consumer services and white-label solutions for banks and airlines [9][10]. - The acquisition is expected to provide Despegar with a boost in investment, which could help it overcome challenges faced over the past decade [7][8].