Expedia Inc. (EXPE) has completed the acquisition of Wotif.com Holdings Ltd. for a total cash consideration of A$703 million or A$3.30 per share (equivalent to US$612 million or US$2.87 per share based on the exchange rates as of Nov 13, 2014). This deal was announced in July.
Australia-based Wotif.com is an online travel company that offers hotel rooms, airline tickets, and vacation packages in more than 69 countries. The company has a number of online travel brands in the Asia-Pacific region including, Wotif.com, lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology.
The acquisition will complement and enhance Expedia’s corporate travel portfolio with the addition of leading online travel brands. Also, the deal will help increase the company’s exposure in the Asia-Pacific region, while boosting international revenues. In the last quarter, the company’s international business was up 16.7% sequentially and 20.3% from the last year.
We believe that it is important for Expedia to expand internationally, especially since China and other Asian countries offer good growth opportunity being relatively under-penetrated. Also, the strategy has worked out well for its major competitor Priceline.com (PCLN), which owns Booking.com in Europe and Agoda.com in Asia.
To counter the increasing competition in the online travel industry, the company has been making acquisitions and entering into strategic alliances. In June, Expedia agreed to acquire a European online car rental company — Auto Escape Group — to expand into the European car rental market. In 2013, Expedia signed a strategic long-term marketing partnership with Travelocity to share the workload related to searches, bookings and promotion.
We believe these alliances and acquisitions will help Expedia grow in the future.
Expedia, one of the leading online travel companies in the world, reported third-quarter earnings of $1.83, surpassing the Zacks Consensus Estimate by 21 cents. However, revenues were $1.71 billion, up 14.6% sequentially and 22.2% year over year. While growth rates across most of the brands were healthy, Expedia, Trivago and Hotels.com were the strongest.
Expedia has a Zacks Rank #3 (Hold). Other stocks that are performing well at the current levels include E-Commerce China Dangdang Inc. (DANG) and Renren Inc. (RENN). All these stocks sport a Zacks Rank #1 (Strong Buy).
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