Online travel giant Expedia, fresh off its acquisition of Travelocity, now plans to buy Orbitz Worldwide in a deal valued at $1.6 billion, continuing its rollup of major travel tech brands.
The deal, announced this morning by the Bellevue, Wash.-based company, would leave Expedia and Priceline as the two major U.S. online travel agencies. The Orbitz acquisition includes the CheapTickets, ebookers and HotelClub brands in addition to the flagship Orbitz.com and the business-to-business services Orbitz Partner Network and Orbitz for Business.
“We are attracted to the Orbitz Worldwide business because of its strong brands and impressive team,” said Dara Khosrowshahi, Expedia Inc. President and CEO, in the news release announcing the deal. “This acquisition will allow us to deliver best-in-class experiences to an even wider set of travelers all over the world.”
The deal requires regulatory approval, and could raise objections in the industry by giving Expedia more leverage in negotiating deals with hotel owners, reports Skift, the online travel news site. “The big four U.S.-based online travel agencies, including Expedia, Travelocity, Orbitz, and Priceline, have now just become the big two, with CheapOair rounding out the field,” Skift reports.
However, in a conference call about the deal this morning, Expedia CEO Khosrowshahi cited additional competition from Google and others. “Competition is fierce,” he said, according to Bloomberg Business. “This is an absolutely huge industry, and it’s highly fragmented.”
Expedia will pay $12 per share in cash for Orbitz Worldwide, and a 29 percent premium over Orbitz’s average share price over the past five days. That’s about $1.3 billion, but the deal represents an enterprise value of $1.6 billion including debt, the companies say. Orbitz is trading around $11.63 per share following the announcement.
Orbitz this morning reported gross bookings of $12.4 billion, net revenue of $932 million and profits of $17.2 million for 2014. Expedia Inc., by comparison, reported gross bookings of $50.5 billion, revenue of $5.76 billion and profits of $528 million for last year.
In an interview with the Wall Street Journal, Mark Okerstrom, Expedia’s chief financial officer, acknowledged that the company has no easy task as it integrates multiple acquisitions at once. “We’ve got a track record of being an acquisitive company, but we’ve got our hands full right now,” he said.