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Swissair swallows Dobbs
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May 19, 1999: 3:23 a.m. ET
Swiss group buys U.S. airline caterer for $780M; looks to non-core disposals
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LONDON (CNNfn) - Switzerland's SAirGroup boosted its non-flying business Wednesday with the $780 million cash purchase of Dobbs International Services, the largest airline catering firm in the United States.
Memphis-based Dobbs is being acquired from the financial group VIAD Corp. (VVI). SAir's largest-ever acquisition will be integrated into its Gate Gourmet catering unit which also provides services for train operators.
The deal makes SAirGroup, which owns Swiss flag carrier Swissair, the largest airline catering company in the world and continues its diversification away from carrying passengers and cargo.
Zurich-based SAir has made a series of acquisitions in airline-related services to reduce its reliance on the highly-cyclical passenger business, said analysts. Support services generated 48 percent of its 11.3 billion Swiss francs ($7.54 billion) revenue in 1998 and just under half its 700 million francs in pretax profit.
The enlarged Gate Gourmet operation will have a turnover of more than $2 billion in 1998, said SAirGroup. The deal will be refinanced with a bond issue and dilute earnings-per-share by 3 to 4 percent in the first 18 months, though the company said it will also generate significant cost savings.
The deal is expected to close in the third quarter of the year but is subject to regulatory approval.
SAir said it would also look to sell non-core assets and analysts believed it may seek to ultimately float its Swissair airline unit as a standalone subsidiary.
VIAD, which has assets of $2.5 billion, has gradually sold off its portfolio of travel industry assets over the past two years and plans to focus on higher-growth sectors.
SAirGroup shares rose 7.50 francs to 348.50 francs in early Zurich trade Wednesday. VIAD closed down 5/16 Tuesday at 28-11/16.
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Swissair
VIAD Corp.
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