Expedia Inc. agreed to buy Orbitz Worldwide Inc.
for about $1.34 billion, further consolidating the online travel industry. Orbitz
shareholders will receive $12 a share in cash, a 25% premium over Wednesday’s
close. Orbitz shares surged 21% and last traded above the offer price in August
2013. Expedia shares jumped more than 13%.
Orbitz sells online travel services through its namesake
site, as well as ebookers.com and CheapTickets.com, among others. Expedia,
which was launched in 1996 by a small division within Microsoft, went public in
1999 and has grown into a travel giant with brands including Hotels.com,
Hotwire, eLong Inc. and Trivago.
Over the past year, Expedia has been buying more brands to
add new customers. The company in November closed a deal worth 703 million
Australian dollars ($612 million) for Australia’s Wotif Holdings Ltd. In the
U.S., the company recently agreed to buy Sabre Corp.’s Travelocity brand
for $280 million.
When asked last week by The Wall Street Journal about the
company’s interest in adding Orbitz, Expedia Chief Financial Officer Mark
Okerstrom said the company was still working on integrating the product of its
latest shopping spree. With the Orbitz acquisition, Expedia would become the
biggest player in the travel retail area with a market share of over 6%,
according to information from Euromonitor International. This puts it back in
the lead, over rival Priceline.com Inc. Expedia said the total
enterprise value of the deal, which includes the assumption of debt, is about
The travel industry is under pressure from new players,
including referral sites, such as Kayak and Hipmunk, that search multiple sites
and startups that offer unpublished discounts and stays in apartments and spare
rooms. Travel websites have responded by offering more discounts and loyalty
Orbitz, meanwhile, also reported Thursday that earnings grew
37% in the fourth quarter as gross bookings rose 10% to $2.7 billion. The
company posted higher volume in hotel, air, car and vacation packages, as well
as higher average booking prices. Revenue from hotel room nights improved 18%.
For its part, Expedia reported last week that its
fourth-quarter profit slipped as foreign exchange costs and ramped up spending
in China spoiled the online travel agent’s holiday travel season.
here to access the full article on The Wall Street Journal.