--Expedia to take majority control of Europe-focused metasearch
site
--Move comes after Priceline agreed to buy metasearch leader
Kayak
--Trivago brings Expedia valuable Europe exposure and
fast-growing traffic channel, executives say
(Adds executive comments from conference call to paragraphs
three through seven and 11)
By Joan E. Solsman
In a surprise move, Expedia Inc. (EXPE) agreed to buy a majority
stake in Europe-focused travel metasearch engine Trivago a year
after spinning off another ad-based business, TripAdvisor Inc.
(TRIP).
In addition, the move comes six weeks after Priceline.com Inc.
(PCLN) agreed to purchase the leading travel metasearch company
Kayak Software Corp. (KYAK), and a month after Expedia management
indicated it wasn't interested in the metasearch space.
The online travel agency agreed to acquire 61.6% of Trivago for
about 477 million euros, or roughly $632 million--largely with cash
but also with a small amount of Expedia stock. Executives on a
conference call said Trivago's management would hold the rest of
the company, though Expedia would have liked to buy the entire
firm.
Trivago's strength in Europe gives Expedia more exposure there,
a region where it has a scaled position but where biggest
competitor Priceline "still has a sizeable lead," Chief Executive
Dara Khosrowshahi said.
Trivago is also one of Expedia's fastest-growing traffic
channels, allowing the online travel agency to profitably buy
traffic with its ownership stake.
"That was the logic that very early on led us to make the
TripAdvisor investment," he said.
In December 2011, Expedia spun off advertising-driven travel
review site TripAdvisor. Mr. Khosrowshahi said Friday that Expedia
would have liked to continue owning TripAdvisor but that wasn't in
the best interest of shareholders. "We thought that at that time,
the businesses would be valued better separately than
together."
Then last month, Priceline moved deeper into ad-based
monetization with its $1.8 billion deal to buy Kayak, the leading
metasearch travel engine.
Expedia's move now into metasearch differs from Priceline's in a
few ways. Trivago is smaller than Kayak, for one. It is expected to
deliver EUR100 million in revenue this year, or about $133 million,
whereas analysts expect Kayak to book $296 million.
In addition, Priceline's strategy generally is for acquired
brands to largely operate autonomously once they've joined the
fold, while Expedia has spent the last four years investing in
centralizing its businesses with a single technological
platform.
Finally, Trivago leads in metasearch in Europe, a region that is
the industry's centerpoint for growth and where Kayak has less
traction than in the U.S. Chief Financial Officer Mark Okerstrom
noted Trivago has posted four consecutive years of doubling revenue
while being profitable. Expected to close in the first half of next
year, the deal should benefit Expedia's 2013 earnings.
Yet Expedia indicated uninterest in any metasearch mergers after
Priceline's Kayak move.
At a conference last month, Mr. Khosrowshahi said the metasearch
proposition is a solid one from a consumer standpoint, and Expedia
always keeps its eye on good brands. But "right now, we're focused
on our base business versus looking to make any big moves," Mr.
Khosrowshahi said.
Expedia shares were down 2.3% at $59.49 in the midst of a broad
market decline. The stock has more than doubled since the start of
the year.
Write to Joan E. Solsman at joan.solsman@dowjones.com.
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