Business
Expedia announced plans today to buy its smaller rival Orbitz Worldwide for $1.3 billion. Expedia hopes to regain its edge against Priceline in the $444 billion online travel industry. CBS News reports that shares of both companies surged on the news. In afternoon trading Expedia was up nearly 17 percent, and Orbitz had shot almost 22 percent higher.
Bellevue, Washington-based Expedia will pay $12 per share in cash for Orbitz, which is headquartered in Chicago. That's a 29 percent increase over Orbitz' average trading price during the previous five days. The deal would add Orbitz to Expedia's already-formidable lineup of online travel brands, which include Hotels.com, Trivago and Hotwire, and promises to ratchet up competition in an industry where it's already intense. A larger Expedia should be good news for consumers because it will keep the power of airlines in check, according to the Business Travel Coalition, which represents corporate travel departments.
The deal is set to push Expedia into the lead against Priceline in global travel bookings, notes Bloomberg. Expedia’s total bookings totaled $50.4 billion last year, while Orbitz had $12.4 billion. While Priceline hasn’t reported full-year gross bookings, it had $39.6 billion in bookings in the first nine months of 2014 compared with Expedia’s $39.1 billion. The proposed acquisition also continues a mergers-and-acquisitions boom in the online-travel industry. Priceline last year bought a minority stake in Ctrip.com International Ltd. and paid about $2.5 billion to purchase restaurant-reservations website company OpenTable Inc. Expedia, based in Bellevue, Washington, agreed last month to acquire Sabre Corp.’s Travelocity for $280 million in cash to bulk up against Priceline and other competitors.
In terms of future acquisitions, Reuters writes that Expedia Chief Executive Officer Dara Khosrowshahi said during a call Thursday with investors: "We have got plenty on our plate, and we're not necessarily looking to jump around in the (coming) weeks or months." Instead, the company expects to grow in the short term by bringing in programmers, designers and marketers from Orbitz, as heavy competition among employers has led to a scarcity of high-quality talent, Chief Financial Officer Mark Okerstrom said. Expedia Inc said it expected the deal to generate $75 million in savings and revenue, amounting to an extra 75 cents in adjusted earnings per share, in the year after the two bookings agencies are integrated.
