Over the past several years, the online travel agency industry has been consolidating something fierce. The largest player Priceline acquired Booking.com in 2005, Agoda in 2007, and Kayak in 2013, and is today the king of OTAs with a market cap of over $57.77 billion. To match its top rivals and with following trend, Expedia, Inc. purchased Trivago in 2012, Australia’s largest OTA Wotif in July 2014 and Travelocity in January 2015. Off late this month, it announced its agreement to acquire rival Orbitz Worldwide, Inc. for $1.6 billion, or $12 per share.
Expedia and Orbitz each administer an array of booking sites, including their flagship namesakes that help travelers find the best prices on airfare, hotels, rental cars and more. With this agreement, Expedia will bring together two of the best-known names in the Web-based travel marketplace, capitalizing its increasing business with great expansion. Expedia anticipates it will take three to four months for shareholder approval as well as any regulatory hurdles so the deal is unlikely to close until the second half of the year.
Expedia President and CEO Dara Khosrowshahi bought Orbitz since it has strong brands and impressive team worldwide. The acquisition will add Orbitz’ $1.29 billion Company to Expedia’s $11.34 market cap to form a company worth $12.63 billion and allow Expedia to deliver best-in-class experiences to an even wider set of travelers all over the world. With the announcement of the acquisition, shares of Orbitz climbed 21.8 per cent by close of trading to $11.72 and that of Expedia climbed 14.5 per cent to $89.57.
Though this deal may look impressive on the paper, shareholders are not any impressed with it since lawsuits against the deal started surfacing. Heavyweight law firm, Levi & Korsinksy LLP incorporated an investigation into the fairness of the sale of Orbitz to Expedia, Inc. The investigation concerns whether the Board of Orbitz breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Expedia, Inc. is underpaying for Orbitz shares.
According to industry research, Strategy analytics summed up that the ongoing deal among the travelling sites accentors an underlying push boosting the market share and edging the prolonged competitors, where the consumers are particularly using travel apps on their mobiles.
The company has set a wise inorganic growth plan for both domestic and international markets that has played a vital role in bringing out of a substantial fall. Priceline overtook Expedia in 2010 to become the world’s largest OTA by bookings but now with brands like Orbitz.com, CheapTickets, ebookers, HotelClub and Orbitz Partner Network in its kitty, Expedia would give tough competition to the industry’s leading players such as The Priceline Group Inc. and TripAdvisor Inc.