In the continuing battle to dominate the Web’s lucrative travel-booking business, Expedia announced Thursday it is buying rival travel site Orbitz for approximately $1.33 billion, seeking a greater share of an extremely competitive market.
The news marks Expedia’s second major acquisition in the past month following its buyout of Travelocity for $280 million only a couple weeks ago.
“We’re really excited to announce that Expedia Inc. has signed an agreement to acquire Orbitz Worldwide, which owns a portfolio of successful travel brands including their namesake Orbitz brand, along with other well-known consumer brands around the world,” said Expedia President and CEO Dara Khosrowshahi in a conference call announcing the deal.
By purchasing the Orbitz brand, Expedia also gets its subsidiary companies like CheapTickets, ebookers and HotelClub. Expedia will pay $12 per share for Orbitz, which represents a premium of about 29 percent for the average previous five-day share price.
News of the deal sent shares of both companies sharply up on Thursday. Expedia shares rose $11.35, or 14.50 percent, to close at $89.57, while Orbitz was up $2.10, or 21.83 percent, to $11.72.
According to Mr. Khosrowshahi, the acquisition of Orbitz Worldwide, including debt, would represent a net price of about $1.6 billion. Expedia’s purchase of Travelocity in late January and its purchase of Orbitz reflect the Bellevue, Washington-based company’s goal of dominating the travel-booking industry. It also comes after Expedia’s purchase of Wotif.com, an Australian travel company, for $658 million last July.
SEE ALSO: Angela Merkel takes tough line on Greece ahead of key meeting
Although the board of directors of both companies has approved the transaction, it still requires approval by the majority stakeholders of Orbitz common stock as well as standard industry regulations, until that happens no closing date for the deal has been announced.
Expedia officials say the recent acquisitions represent a move to unify a highly fragmented industry and stay competitive against rivals like Google and TripAdvisor. Expedia will also gain access to Orbitz’s customer base and its worldwide brand recognition.
“We intend to bring together the best of both companies and in the process provide Orbitz’ brands access to the resources of Expedia Inc. to continue to grow and thrive in the highly competitive global travel market,” said Mr. Khosrowshahi.
Last year, Orbitz recorded just over $12 billion in travel bookings and over $930 million in revenue.
The research firm Phocuswright estimated that online travel agencies claim only about 16 percent of the total U.S. travel market, or about $51.4 billion, a sign that the industry has plenty of room to grow.
The acquisition would reduce the big four of online booking to just two, with Priceline.com remaining Expedia’s main competition. Priceline acquired yet another rival, Kayak, in 2013, and last year paid out about $2.5 billion to acquire OpenTable Inc., a restaurant-reservations website.
SEE ALSO: After months of decline, U.S. gas prices bump up
The consolidation could attract the attention of the Obama administration for antitrust concerns, although Expedia officials said Thursday they did not see a federal challenge as likely.
“Competition is fierce,” Mr. Khosrowshahi said on a conference call. “This is an absolutely huge industry and it’s highly fragmented.”
But the Orbitz buy could leave Expedia with a dominating position in the industry, while realizing a lot of cost-savings from the merger according to Daniel Kurnos, an analyst at Benchmark Co.
Expedia will “remain the 800-pound gorilla in the industry,” Mr. Kurnos told Bloomberg News. “There are going to be a ton of synergies.”
• Jonathan Soch can be reached at jsoch@washingtontimes.com.
Please read our comment policy before commenting.