USA Networks have agreed to buy a 75% stake in Expedia, mostly from Microsoft Corporation; the deal reportedly values Expedia at $1.5bn (£1.1bn), or $40 per share, about 10% below its current stock market valuation.
Expedia, one of the few firms to have made money in B2C e-commerce, is ranked as the US`s seventh-largest travel agency, and has affiliates around the world, including the UK.
USA Networks, headed by Barry Diller and owner of Home Shopping Network, will also buy online cruise and package holiday broker National Leisure Group Inc. and start a cable-TV travel channel. It will combine the purchases with its stake in Hotel Reservations Network, which sells discounted hotel rooms over the Web, to form USA Networks Travel Group. Expedia is the No. 2 U.S. Internet travel company.
USA Networks—which runs cable networks, a film studio and an entertainment ticketing service, and sells clothes and jewelry over the Web and television—will use the USA Travel Channel to market online bookings on Expedia. Microsoft will own 3% to 5% of USA Networks after the sale, the companies said. Microsoft, which owned about 70% of Expedia`s shares, is selling its stake as it focuses on its software business and cuts back on content and Internet commerce businesses, spokeswoman Katy Fonner said. Barry Diller will become Expedia`s chairman after the sale closes later this year pending government and other approvals.
Expedia had been looking for other partners, Chief Executive Richard Barton said on a conference call. The company was once a unit of Microsoft. In November 1999, Microsoft sold Expedia shares to the public, raising $76.6 million.
USA Networks said the travel companies combined handled 16% of the $14 billion in online travel spending in 2000. It expects the purchases to boost its share of retail transactions over the Web and television to from 5% to 9% this year. The company forecasts $4 billion in travel bookings this year, with that increasing by 40% in 2002, USA Networks said. As of 31st March, the companies had almost no debt and a combined cash balance of $340 million.
USA Networks will buy as many as 37.5 million Expedia shares. Microsoft agreed to sell all of its 33.7 million Expedia shares and warrants. At the close of the purchase, USA Networks will own 67% to 75% of Expedia`s shares outstanding and more than 90% of the voting interest.