Expedia to Buy Orbitz for $1.34 Billion -- 4th Update

By Angela Chen 

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.

"We've got a track record of being an acquisitive company, but we've got our hands full right now," he said.

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 $1.6 billion.

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new players, including referral sites, such as Kayak and Hipmunk, that search multiple sites and startups that offer unpublished discounts and stays in apartments and spare rooms.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 programs.

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.

Other names in the sector, like Priceline.com Inc. and TripAdvisor Inc. also bounced on the news. Priceline edged up 2.6%, and TripAdvisor, itself an Expedia spinoff, was up 19%. TripAdvisor reported a bigger-than-expected surge in quarterly revenue after Wednesday's closing bell.

Write to Angela Chen at [e-mail]

Access Investor Kit for eLong, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2901382059

Access Investor Kit for Expedia, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US30212P3038

Access Investor Kit for Orbitz Worldwide, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US68557K1097

Access Investor Kit for The Priceline Group, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US7415034039

Subscribe to WSJ: http://online.wsj.com?mod=djnwires