While this seems like an opportunistic buy with Wotif's financial troubles, for Expedia this ties into two priorities: Expanding in Asia-Pacific and growing its global hotel business in competition with the Priceline Group's Booking.com and Agoda.
The merger and acquisition binge in online travel just kicked up a notch as Expedia Inc. agreed to acquire Australia’s Wotif Group for $658 million (AU $703 million), or AU $3.30 per share.
With brands in the Asia-Pacific region that include Wotif.com, Lastminute.com.au, Travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology, the Wotif Group expands Expedia’s presence in the region and would supplement brands such as eLong in China, for example.
The Wotif Group did AU $555.3 million (AU$ 593 million) in gross bookings, AU $71.1 million (AU$ 76 million) in revenue, and sold 3.2 million hotel room nights in the six months ending December 31, 2013, Expedia states.
But, Wotif has been struggling for the last few years with falling profitability: It is expecting a net profit of around AU $40.2 million (AU $43 million) for 2013-14, down from $47.4 million (AU $51 million) in 2012-13 and AU $54.3 million (AU $58 million) the year before.
Wotif has said the high Aussie dollar is to blame, which means more Australians are holidaying overseas, and tough competition in the Australasian hotel market. Its shares have fallen 42 percent in the last 12 months.
According to the Australian Age, “Over the past year the Wotif board has conducted two strategic reviews. The latest sought to put the company on the market, allow them to conduct due diligence and find the highest bidder.”
The AU $3.30 per share acquisition price represents a 30% premium on the Wotif Group’s share price counting the average share price for the five days leading up to and including July 4, 2014. Bloomberg reports that the premium is just 25% on Wotif Group’s July 4 closing share price.
Expedia is obviously in a acquiring mood, having announced June 26 that it is making a much smaller acquisition of European car rental site Auto Escape Group.
Expedia Inc.’s two acquisitions follow the Priceline Group’s announcement in June that it is acquiring restaurant-reservations site OpenTable for $2.6 billion.
The scope of Expedia’s acquisition of the Wotif Group doesn’t compare to what Pricleine is shelling out for OpenTable, but it is fairly large.
In 2013, Expedia acquired a majority stake in German metasearch site Trivago for $632 million.
However, the $658 million price tag for the Wotif Group appears to be for 100% of the company.
Expedia’s Wotif Group acquisition ties into two priorities: Expanding in Asia-Pacific and growing its global hotel business in competition with the Priceline Group’s Booking.com and Agoda.
In that sense, while the Priceline Group’s acquisition of OpenTable is headline-grabbing and sexy, Expedia’s acquisition of the Wotif Group is core to Expedia’s immediate and long-term objectives.
The acquisition is subject to shareholder and regulatory approvals and would be expected to close in the fourth quarter of 2014.
Here’s the details of the acquisition agreement that Wotif filed with regulatory authorities in Australia:
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