Expedia buys rival travel site Orbitz for $1.3B
After buying Travelocity, Expedia says competition fierce in travel sector
Expedia is buying rival online travel site Orbitz for approximately $1.33 billion US, adding to the stable of brands it has snapped up recently in order to extend its reach and keep pace in the fiercely competitive travel-booking industry.
Expedia's acquisition of Orbitz is its second major deal in the past month as the industry continues to consolidate. Expedia announced the $280 million acquisition of another rival, Travelocity, in late January. It also follows the company's July announcement that it was buying Wotif.com for $658 million.
By bringing Orbitz into the fold, Expedia gains access to the Orbitz namesake brand, as well as brands like CheapTickets and HotelClub. Expedia's portfolio already consists of nearly a dozen brands such as Hotels.com and Hotwire.
Speculation swirled last month that Orbitz may be bought, when a media report said that the company was considering selling itself. An Orbitz spokesman declined to comment at the time.
Expedia, based in Bellevue, Washington, said Thursday that it will pay $12 per share, a 25 per cent premium to Orbitz' closing price of $9.62 Wednesday.
Shares of Orbitz Worldwide Inc., based in Chicago, soared $2.05, or 21.3 per cent, to $11.67 in morning trading. Expedia's stock surged $9.23, or 11.8 per cent, to $87.45.
Recognized brand and loyalty program
Expedia CEO Dara Khosrowshahi said during a conference call that Orbitz was an attractive acquisition option in part because of its highly recognized brands and loyal customers. Expedia also likes Orbitz' loyalty program, with plans to invest in it and grow it further.
Khosrowshahi, along with Chief Financial Officer Mark Okerstrom, said that the deal will help Expedia better compete for customers in a sector that is constantly seeing new players emerge.
"We believe Orbitz can add to scale and add to our ability to run a more efficient machine," Khosrowshahi said.
Okerstrom said that these types of acquisitions are important, as it provides a way to avoid being overtaken by rivals like Google and TripAdvisor.
Expedia is also up against competitors like Priceline Group, which owns sites like Priceline, Booking.com, Kayak and OpenTable. And there are new pressures from sites like airfare search Hipmunk and last-minute deal site HotelTonight.
The Expedia executives said that they are very optimistic they won't run into any major resistance from regulators on the Orbitz deal, with Khosrowshahi noting that consolidation is natural in a highly fragmented marketplace.
The boards of both companies have approved the deal, but it still requires a nod from the majority of Orbitz shareholders. Expedia, which anticipates $75 million in savings from the buyout, said it is currently unable to project when the transaction will close.