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Expedia to Buy HomeAway for $3.9B, Rises in After-Hours

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Online travel-booking company, Expedia Inc.EXPE yet again bolstered its position in the travel market. It announced on Wednesday that it has entered into a definitive agreement to acquire vacation rental site HomeAway Inc. AWAY . The acquisition, which has been approved by the boards of both companies, is expected to close early next year.

The deal is valued at $3.9 billion in cash and stock, more than twice the amount Expedia paid to acquire competitor Orbitz for $1.6 billion. Expedia is said to pay approximately $38.31 in cash and stock for each share of HomeAway, based on Expedia's stock price at the end of the day on Nov. 3.

Therefore, it is the largest acquisition in Expedia's history, after Orbitz Worldwide and Travelocity (for $280 million).

The announcement sent Expedia shares up 2.45% to $137.50 in the after-hours trading session.

HomeAway

HomeAway, based in Austin, TX, is engaged in providing an online marketplace of vacation rentals accommodations. The company's portfolio includes vacation-rental websites HomeAway.com, VRBO.com and VacationRentals.com through which it offers apartments, castles, condos, estates, hotels, homes, studios, town homes, and villas. It collects a fee form owners to publish detailed property listings, including photographs, descriptions, location, pricing, availability and contact information.

As per HomeAway, it has over 1 million paid listings of vacation rental homes in 190 countries.

Synergies

The transaction, expected to close in the first quarter of 2016 subject to regulatory approval, will be dilutive to Expedia's earnings per share in 2016, the first year of ownership, but will be accretive in the long run.

Also, it will ramp up its presence in the incredibly profitable vacation rental market and boost its competition with apartment-sharing startup AirbnB. Analysts have cautioned that competition with the startup could intensify by 2018.

HomeAway owns VRBO, or Vacation Rental by Owner, Airbnb's biggest competitor, which enables property owners to rent spaces without a business license.

Airbnb in general provides short-term rentals and HomeAway often targets travelers looking for one-week or longer stays. Therefore, the acquisition will give Expedia the opportunity to expand its options for consumers beyond hotels, boosting its efforts to build a place in the fast emerging alternative accommodations space, a market that Expedia values at around $100 billion.

Expedia has conventionally focused on primary urban vacation destinations. By contrast, beach and ski rentals account for a large portion of HomeAway's bookings. This led to the start of a pilot program in 2014 that listed 115,000 HomeAway vacation properties like beach, ski and other resort locations.

Therefore the deal is in sync with its current ambitions.

Expedia carries a Zacks Rank #2 (Buy). Other stocks in the technology space worth considering include Amazon.com AMZN and JD.com, Inc. JD . Both stocks carry a the same rank as Expedia.

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EXPEDIA INC (EXPE): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

HOMEAWAY INC (AWAY): Free Stock Analysis Report

JD.COM INC-ADR (JD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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