) has agreed to acquire a 61.6% equity stake in hotel search
website Trivago for a total of €477 million or roughly $632
The payment includes €434 million in cash and the remaining
€43 million in Expedia stock. The acquisition is expected to
close in the first half of 2013, subject to various regulatory
and anti-trust approvals.
Trivago is a German search company that focuses on hotels. It
compares more than 600,000 hotels across 140 booking sites in
more than 30 countries and 23 languages. The company expects to
exceed €100 million (or about $132 million) in net revenue
The acquisition will allow Expedia to further boost its
corporate travel portfolio and expand into the European online
travel markets. The deal will boost cost-efficiency measures and
help Expedia pick up some market share.
Upon the completion of the deal, Trivago co-founders and
management team will continue to operate independently from
Germany. Management also expects the deal to be accretive to
adjusted earnings per share in 2013.
We believe that it is important for Expedia to expand
internationally, especially since the strategy has worked so well
for its main competitor
), which owns Booking.com in Europe and Agoda.com in Asia.
Expedia is one of the leading online travel companies in the
world. In the third quarter, the company reported strong results,
exceeding estimates on both the top and bottom line, helped by a
stronger travel market all over the world, contribution from the
VIA acquisition and strategic expansion in Asia. The company's
cash and short-term investments were $2.36 billion at the end of
We remain encouraged by Expedia's strong cash position and
believe that the company has sufficient financial resources to
acquire Trivago. We expect the business to continue on its growth
path, due to the greater choice of accommodation that Expedia is
now able to offer.
Also, recently, management declared a special cash dividend of
$0.52 per share, which was in addition to the company's regular
quarterly cash dividend of $0.13 per share. We believe that these
special dividends speak about the company's healthy cash position
and are a good way of encouraging investor confidence as they
return shareholder value.
However, the company will continue to face challenges from
players like Priceline
, Orbitz Worldwide
) and Travelocity, as well as a growing number of local Chinese
players that could make expansion in the fast-growing Chinese
Currently, Expedia retains a Zacks #2 Rank (Buy).
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