Expedia-HomeAway Merger: Will Another Company Jump In To Steal the Deal?

The odds are low that a third company would jump in and try to steal HomeAway from Expedia Inc., but there's speculation out there that a company such as the Priceline Group could enter the fray.

[Update: Priceline has ruled itself out of the competition, if there indeed is one.]

The cash and stock deal has Expedia paying the equivalent of roughly $38 per share in the $3.9 billion agreement, and HomeAway's stock was trading at $39.82 late afternoon on November 5, a day after the deal announcement.

In a research note, Piper Jaffray raised its price target for HomeAway's stock to $42, from $39, "given we believe there is still potential for another bidder to enter this process."

In a broadcast on CNBC November 5, Jim Cramer, host of "Mad Money," added to the speculation, saying "Brilliant acquisition. Great for all. [I] just hope they [Expedia and HomeAway] get it at that price because I love both companies."

Cramer mentioned the Priceline Group and Yahoo, with the latter being a far-fetched scenario, as possible suitors.

HomeAway's websites are "cumbersome," and the company didn't have the money to really fix them, but Expedia does and can, Cramer said.

Expedia CEO Dara Khosrowshahi has declined to elaborate on whether there was a bidding process for HomeAway in the weeks prior to the deal announcement. But it appears as though there was a competitive process.

The merger agreement shows that the two companies signed a mutual nondisclosure agreement September 18 so Expedia was in the mix at least since that timeframe.

Asked on CNBC whether there was a sales process, HomeAway CEO Brian Sharples said the companies would file a proxy statement with the Securities and Exchange Commission pertaining to the issue and wouldn't provide any details until then.

Sharples did say: "We do feel very confident that we've gotten the best price for the shareholders and we've certainly done that work."

That would lend credence to the idea that there was a sales process — and this likely would diminish the possibility that a third-party would bid for HomeAway at this late hour because the usual suspects probably already had the opportunity to kick the tires.

One source tells Skift that HomeAway did run a sales process and that Expedia was invited to it. Another source says the Priceline Group, which hasn't had the appetite for huge acquisitions since it acquired OpenTable in 2014, did not submit a bid.

The biggest loser in the Expedia-HomeAway deal appears to be TripAdvisor. That's because the Priceline Group, through its Booking.com unit, already has a viable vacation rental business while TripAdvisor's vacation rental business (it owns FlipKey, among other sites) isn't very material to its financials and doesn't appear to be making a dent.

TripAdvisor, with its nearly $12 billion market cap and healthy balance sheet, could conceivably muster the financial resources to acquire HomeAway but it would be a large deal, and this sort of buy is not typical to its acquisition style.

Under certain circumstances if the Expedia-HomeAway deal doesn't close, then HomeAway would have to pay Expedia a $138 million breakup fee. If a new bidder came in and offered considerably more than the $3.9 billion, that $138 million breakup fee would be pocket change.