Business

Despegar.com may review acquisition of Mexican rival Best Day

Since the coronavirus crisis affected Despegar's business, the company's having second thoughts on the deal

Decolar is the Brazilian subsidiary of the Argentine company Despegar. Photo: Shutterstock
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  • Despegar fired 400 employees in Brazil, Uruguay and Colombia;
  • The company’s having second thoughts since the announcement it was buying Best Day;
  • Coronavirus affected travel agencies business and Despegar had a 32% drop in total gross reserves during Q1.

Argentina-based Despegar, the largest travel agency in Latin America, announced in January that it would be acquiring its Mexican rival Best Day for $136 million. Since then, the coronavirus pandemic changed economies prospects worldwide and now the company is having second thoughts about the acquisition, as reported by Valor Econômico.

Recently, Despegar resorted to layoffs, firing 400 employees distributed among Brazil, Uruguay and Colombia. Despegar.com reported that it is monitoring and discussing with sellers the impact of the pandemic on Best Day. “The company cannot guarantee that it and the sellers will consummate the acquisition of Best Day under existing terms or under other terms”, Despegar said in a statement to the market.

The purchase contract is subject to price adjustments up to nearly 10%. Despegar.com’s current expectation is that if the parties agree, the agreement will undergo significant changes, including changes in the amount and payment terms as the company is trying to minimize or eliminate cash disbursements at least until 2022.

Valor reported that preliminary data from Despegar.com indicates a 32% drop in total gross reserves in the first quarter, totaling $790 million when it was $1.16 billion in the same period in 2019. As for revenue, Despegar.com estimates a 41% drop in the quarter, to $78 million. The operating result is expected to range between a loss of $21 million and $26 million.