Momondo: Expanding Kayak’s portfolio
After the unconventional acquisition of Opentable, Momondo was a logical addition as it adds to the travel database of Kayak’s existing portfolio. The combined group would have more properties and improved chances of cross-selling across the three brands.
Priceline’s increased geographical presence
Priceline’s Kayak (PCLN) has a strong presence in Western and Southern Europe, including France, Spain, Germany (Swoodoo brand), and Austria (Checkfelix brand). However, it has been struggling against Skyscanner in the UK, as well as in Nordic countries and Russia.
Cheapflights has a presence in almost 20 markets, and Momondo has a presence in almost 35 markets. These are the regions where Momondo could help Kayak, thus improving the group’s geographic reach. Kayak customers would be able to obtain a more customized experience for their travel search in Europe.
Cost and other synergies
Apart from adding to Priceline’s top line, as Momondo Group generated revenues of $102 million in 2016, the acquisition also provides many synergies. As duplication of jobs is removed and operations streamlined as the backend platform is integrated, there would be obvious cost savings for the combined entity.
Other synergies could come in the form of higher negotiating power with hotels and airlines. The combined group could have a better chance of getting a higher commission from hotels and airlines.
Risks to the acquisition
The logical risk comes from the delay in completing the deal and integrating Momondo and Cheapflights into Kayak. The risks could be loss of business, as some Momondo Group customers may not find the same value in Kayak.
Investors can gain exposure to Priceline by investing in the PowerShares DWA Consumer Cyclicals Momentum ETF (PEZ), which invests 6.1% of its holdings in Priceline. PEZ has no holdings in Expedia (EXPE), TripAdvisor (TRIP), or Ctrip (CTRP).