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| Clermont Meridian Trading Outlines Priceline's Acquisition of Kayak for $1.8bn |
Priceline, a US online travel booking company, announced the $1.8 billion acquisition of Kayak Software, a specialized search company, in an effort to fight Google's expanding prominence in the internet travel industry. Clermont Meridian Trading financial experts have offered their opinions on the forthcoming transaction.
“Priceline announced on Thursday that it would fund two-thirds of the purchase price with stock and the rest with cash, taking advantage of the company's surging stock price, which has seen its stock worth more than quadrupled in the last three years to $31 billion. According to our intelligence, Priceline handles one out of every 20 hotel bookings worldwide, with a bigger proportion in Europe,” said Andrew Wakefield, Head of Corporate Derivatives at Clermont Meridian Trading.
The announcement comes less than four months after Kayak raised $91 million in a long-awaited initial public offering, making it one of a handful of digital businesses to test the IPO market this summer after Facebook's disastrous IPO. The eight-year-old company, whose founders came from rival online travel industry sites Orbitz, Expedia, and Travelocity, is a so-called "meta-search" startup that sources travel information from other search engines.
Kayak was a group of travel companies that unsuccessfully battled Google's acquisition of flight information service ITA Software last year, a deal that has given the search giant more clout over one of the most important parts of the e-commerce industry. Though Google's move deeper into helping searchers explore their trips has sent tremors across the industry, it has maintained it will continue to route its customers to online travel providers like Priceline to finalize hotel or airline purchases.
"Priceline has faced greater competition for online clients this year, forcing it to warn of rising marketing expenses and increasing pressure to find new ways to gain online business in previous earnings calls,” said Clermont Meridian Trading’s Senior VP of Equity Trading, George Willis.
While Priceline derives the majority of its money from hotel bookings, Kayak makes more than four-fifths of its revenue from airline referrals. Priceline's CEO, Jeffery Boyd, disputed that the move was spurred by the company's planned entry into the airline ticket market.
Priceline's agreed offer of $40 per share is 54% higher than Kayak's July IPO price. The stock closed at $31.04, up 26.8% in after-market trade to $39.35, after reaching a high of $37 in its brief career as a public corporation.
In the case of significant changes in Priceline's share price, the stock element of the transaction contains an unusual 10% "collar," which adjusts the number of shares Kayak investors will receive if the shares go beyond that range.
In after-hours trading, Priceline shares fell 2.2 percent to $614.