has announced it has entered into an agreement to acquire Hotwire.com
. The consideration is $665 million in cash plus the assumption of approximately $20 million of options and warrants. IAC estimates 2003 full year Gross Bookings for Hotwire of approximately $700 million and Net Revenue of approximately $110 million, and expects the transaction to be slightly accretive to 2004 adjusted EPS. Following the acquisition, Hotwire will remain a separate subsidiary and brand within IAC.
Founded by Texas Pacific Group and airlines American, America West, Continental, Northwest, United and USAirways, Hotwire is an industry leader in ‘opaque’ travel, a service that enables online consumers to see and choose a specific fare or rate without knowing the brand of the supplier until after the item is purchased. This model enables Hotwire to offer discounts of up to 45 percent on airfares, and up to 75 percent on hotel rooms. Hotwire directly addresses the needs of a significant segment of the overall travel market: a recent report from Forrester Research
notes that 19 percent of web travel bookers buy on price alone, without consideration of individual airline or hotel brands.1
“There is a tremendous potential for growth online, including opaque and price-sensitive travel segments,” said Erik Blachford
, President and CEO of IAC Travel. “As the fastest growing opaque travel web site, Hotwire is a compelling addition to the IAC Travel portfolio. We are deeply impressed with everything accomplished by Karl Peterson and the Hotwire team to date, and are excited about adding more fuel to their entrepreneurial fire.”
Hotwire President and CEO Karl Peterson
added, “Hotwire consistently offers lower prices for leisure travelers because of our opaque model, and we have a significant advantage over other opaque offerings because we do not require consumers to engage in a bidding process. For suppliers, the value proposition is clear, they can drive incremental and profitable business by providing discounted inventory without harming their published prices or impacting their brands. Becoming a part of IAC Travel will enable Hotwire to maintain our position as a profitable and fast growing opaque travel site.”
The transaction is expected to close during the fourth quarter of 2003, subject to customary regulatory approvals.
IAC also announced the formation of a single travel division, IAC Travel, that will consist of the following IAC businesses: Expedia.com, Expedia Corporate Travel, Classic Custom Vacations, Newtrade Technologies, Expedia’s international brands and private label offering WWTE; Hotels.com and its affiliated brands including Travelnow.com; Interval International, TV Travel Shop; and Hotwire. All companies will remain independent brands within IAC Travel. Erik Blachford, President and CEO of Expedia, will lead IAC Travel as President and CEO. Hotels.com President Bob Diener, Hotels.com CEO Dave Litman, and Hotwire president and CEO Karl Peterson will report directly to Mr. Blachford.
Barry Diller, Chairman and CEO of IAC, said “Erik Blachford is a great executive…having been given the reins of Expedia such a short time ago from its founder, he has swiftly, sensitively, and confidently taken control of the company. It is those qualities, together with being a perfect pitch marketer and businessman, that make him truly the perfect choice to lead our consolidated travel assets.”
Mr. Diller continued, “It is not so long ago that these online travel services didn’t exist - it ought to be now clear to all that they will stand the test of time and play an increasingly important role in every aspect of the travel experience. The brands of IAC Travel, from Expedia.com, Expedia Corporate Travel, Classic Custom Vacations, Newtrade Technologies, Expedia’s international brands and private label offering WWTE; Hotels.com and its affiliated brands including Travelnow.com; Interval International; TV Travel Shop; and Hotwire give this company the ability to be a long term leader in an area that is still in its infancy…travel is the largest business sector in the world, and this company is every year going to increase its share of that activity and in so doing will ensure that IAC is reaching its goal to become the largest and most profitable interactive company in the world by pursuing a multi-brand strategy.”
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