The Expedia’s acquisition of its US rival Orbitz for $1.4bn is seen as major drive of this travel company to expand in the online travel booking market.
Orbitz owns ebookers.com and CheapTickets.com that was taken over by Expedia after just one month of acquiring Travelocity for $280mn and Australia’s Wotif for $612mn (A$703mn).
Expedia’s expansion drive is supported by nearly half a dozen brands, including well known ones of Hotels.com and Hotwire.
The Expedia’s drive for acquisitions is to shield its competitors, such as, Google and TripAdvisor from overtaking them in the market, said Mark Okerstrom, chief financial officer of Expedia.
The strategy seems to be working as Expedia recently left behind Piceline, which used to be the world’s biggest travel booking company before the takeover. Priceline owns Booking.com, Priceline.com, OpenTable and Kayak. Google is also on the road to beef up its travel business.
According to Okerstrom, the company is not likely to face any hurdles from the regulators as the deal is approved by the shareholders. In a conference with journalists and analysts, Okerstrom intoned on Thursday, “it is a $1.3tn industry and is highly fragmented.”
He further added, “We are only a small player and our overall share is in single digits.”
Daniel Kurnos, an analyst at Benchmark supported the Expedia’s strategy and predicted it to remain as a behemoth in the industry. Expedia was founded as a division of Microsoft in 1996, although, now it is a listed company having a market value of almost $10bn.
Kurnos is of the opinion that the deal will factor in allowing Expedia saving a lot of money while expanding its customer base across the spectrum, according to a report.
What CEO has to say
Expedia’s chief executive, Dara Khosrowshahi, justified the proposed deal with the company being “attracted to the Orbitz Worldwide business because of its strong brands and impressive team”.
He further said, “We believe Orbitz can add to scale and add to our ability to run a more efficient machine.”
Expedia’s current share price of $12 per share correspond to 25% premium above the share price of Orbitz’s, closing at $9.62 per share on Wednesday.
Orbitz’s share price jumped 21% to $11.65 by 11.30am on Thursday.