Expedia and Orbitz
In the previous part of this series, we looked at Magnetar Capital’s activist position in Orbitz Worldwide Inc. (OWW). We also touched on Expedia’s (EXPE) proposed acquisition of OWW. Now let’s take a look at the transaction details and the potential benefits of the merger.
On February 12, 2015, Expedia announced its acquisition of Orbitz in an all-cash transaction worth $1.6 billion in enterprise value, or $12 on a per share basis. The deal is currently under regulatory review and will be given the green light once regulators deem the acquisition beneficial to customers and fair to the competitive environment.
Rationale for the merger
The combination of EXPE and OWW will create the largest, most diverse online travel company. In terms of gross bookings, Expedia ranks first among online travel companies with $50.4 billion generated in FY14. It’s followed closely by Priceline Group Inc. (PCLN) with gross bookings of $50.3 billion. Orbitz (OWW) comes in third with gross bookings of $12.4 billion for the same period.
Apart from online and traditional travel companies, operators in the industry also compete with travel research sites and search engines such as TripAdvisor Inc (TRIP), Google (GOOGL), and Yahoo! Inc. (YHOO).
Barney Harford, chief executive officer of Orbitz Worldwide, said in a February 12 press release, “We’re excited for Orbitz Worldwide to join the Expedia, Inc. family and for our teams to work together to further enhance the offerings we provide to our customers and partners.”
OWW is a component of the iShares Russell 2000 Value ETF (IWN), making up 0.03% of the ETF.
In the next part of this series, we’ll take a look at OWW’s fiscal 2014 financial performance.