) announced that it has signed an agreement to buy Kayak Software
Corp. for $1.8 billion or $40 per share, in a move to expand its
online travel business.
Under the terms of the deal, Priceline will pay $500 million
in cash and $1.3 billion in stock. Following the transaction,
Kayak shares jumped 27%, while Priceline shares fell about 1.9%,
in the extended trading hours. Subject to customary closing
conditions and regulatory approval, the buyout is expected to
close in the first quarter of 2013.
Based in Concord, Kayak is a leading travel research site that
helps consumers to compare prices for airlines, hotels and rental
cars from hundreds of websites, including Priceline competitors
Orbitz Worldwide, Inc
). The company recently reported its third quarter profit of $8
million, an increase of 14% from the year-ago quarter.
We believe the deal will likely increase Priceline's market
share in a weakening economy. Recently, Kayak announced its
expansion into Russia and also acquired travel search companies
in Germany and Austria. Considering the condition of the global
economy and the fact that Priceline has a significant exposure to
the European region, the company needs to increase its market
share in other regions.
Upon the completion of the deal, Kayak will continue to
operate independently as a Priceline Group company. Management
also stated that the acquisition will not have any impact on the
company's earnings in 2013.
Priceline.com is one of the leading online travel companies in
the world, helping people to shop for travel. We believe that
Priceline will continue to invest in the business to push growth
and especially to continue its international expansion strategy.
Despite a weak macro environment, Priceline reported strong third
quarter results with earnings beating the Zacks Consensus by 40
Priceline retains a Zacks #2 Rank, which translates into a
short-term Buy rating.
ORBITZ WORLDWID (OWW): Free Stock Analysis
PRICELINE.COM (PCLN): Free Stock Analysis
To read this article on Zacks.com click here.