Expedia Inc. EXPE recently announced the pricing of senior unsecured notes aggregating $750 million. These bonds carry a coupon rate of 5.000% and are due to mature in 2026. The Notes will be issued at a price of 99.535% of the aggregate principal amount.
The offering is expected to close on Dec 8, 2015, subject to customary closing conditions.
Management stated that the net proceeds would be used to fund the potential acquisition of the vacation rental website, HomeAway, Inc. AWAY and other corporate purposes. Last month, Expedia announced its decision to acquire HomeAway for about $3.9 billion.
Expedia is one of the leading online travel companies in the world. In third-quarter 2015, the online travel-booking company used $120.5 million of cash in operations and spent $156.7 million on capex, $1.61 billion on acquisitions and $31.2 million on dividends. Share repurchases were minimal.
At quarter-end, Expedia had cash and short-term investments balance of $1.49 billion, down $1.89 billion during the quarter. The net debt balance was $984.6 million, compared with net cash of $910.6 million at the beginning of the quarter. Including long-term liabilities, the debt to total capital ratio was 61.8% (on the high side).
We believe that Expedia has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving the growth prospects. We believe that this offering will lower the company’s cost of capital, thus strengthening the balance sheet and supporting growth.
Currently, Expedia has a Zacks Rank #3 (Hold). Some stocks that are performing well at the current levels are Stamps.com Inc. STMP and Travelport Worldwide Limited TVPT, both sporting a Zacks Rank #1 (Strong Buy).
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