What the Momondo Acquisition Means for Priceline and Expedia



Priceline’s first deal under the new CEO

The Momondo acquisition will be the first deal of the group under the newly appointed Priceline CEO, Glenn Fogel. This acquisition is lower than Priceline’s (PCLN) last acquisition of OpenTable for $2.6 billion in 2014, and it’s also lower than its acquisition of Kayak for $1.8 billion in 2012. However, the Momondo deal is still one of Priceline’s steeper acquisitions.

Momondo is estimated to have generated $125 million in revenues for the last 12 months, which means a price-to-sales multiple of 4.4x.

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It’s also important that Priceline gets the Momondo acquisition right, particularly after the $941 million impairment of OpenTable. Priceline was looking beyond traditional travel services and OpenTable, which provided a choice of dining locations, seemed to be the obvious complement to Priceline’s travel offerings. Despite the impairment, the acquisition might still prove successful.

Priceline’s acquisition keeps Momondo out of reach of competitors, especially Airbnb, which is looking to expand its offering to flights. It also improves Priceline’s strength in the metasearch business, where sites like TripAdvisor are not only gaining increased popularity but are also building booking capabilities.

According to Kayak’s CEO, Steve Hafner, the deal does nothing to help fend off Expedia’s Trivago, whose strength is hotels, while Momondo Group’s strength is flights.

Expedia downplays impact

It is too soon to ascertain the impact of the acquisition on Expedia. However, both Expedia’s CEO, Dara Khosrowshahi, and its CFO, Mark Okerstrom, have downplayed the impact of the acquisition.

In a recent Goldman Sachs conference, Okerstrom said, “I don’t think that the recent Priceline acquisition necessarily changes the dynamics for us. The dynamics are the same, which is we think Europe continues to be a huge opportunity for us. We have put ourselves in a position now where we have all of the ingredients necessary to be very competitive there.

“We have a standalone agency hotel product that [adds] market commission rates. We have become significantly better at online marketing than we ever have been before. We have great converting websites that are translated into every language. And I think if anything, you’ll probably see us be an inch more aggressive in Europe in 2017 than we were in 2016 when we were pretty focused on integrating the number of acquisitions.”

Investors can gain exposure to Priceline by investing in the iShares US Consumer Services ETF (IYC), which invests 2.6% of its holdings in Priceline. It also holds 0.4% in Expedia (EXPE) and 0.18% in TripAdvisor (TRIP). It has no holdings in Ctrip (CTRP).


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