USA Interactive
and Expedia, Inc. have announced that they have entered into an agreement by which USA, already the majority owner of Expedia, would acquire the Expedia shares it does not currently own in a stock- for-stock transaction that is generally tax-free to Expedia shareholders.
The transaction is valued at $3.3 billion, based on the
closing price of USA common stock on March 18, 2003 and will allow USA to further simplify its corporate structure. The Expedia Board of Directors approved the agreement following the unanimous recommendation and approval of an independent Special Committee of the Expedia Board.

Under the agreement,  Expedia
shareholders would receive 1.93875 shares of USA
common stock for each share of Expedia stock that they own, which represents
approximately a 30% premium, based on the closing price of USA stock and Expedia
stock on March 18, 2003. In the transaction, USA would issue to Expedia public
shareholders approximately 92.5 million basic shares and 124.9 million shares on a fully
diluted, treasury method basis.

The transaction is expected to be slightly dilutive to USA’s adjusted earnings per share
(“EPS”) for 2003, however, due to expected over-performance by Expedia and USA’s
other businesses, USA believes that it will meet its current 2003 budgeted adjusted EPS
of $0.75 per share. In addition, USA expects Q1 2003 EBITA to very significantly
exceed last year’s Q1 EBITA and to beat its Q1 2003 EBITA budgeted amount, and
expects to meet or exceed its Q1 2003 adjusted EPS bud get.

USA also announced that its Board of Directors has authorized the repurchase of up to 30
million shares of USA common stock. USA may purchase shares from time to time on
the open market or through private transactions, depending on market conditions, share
price and other factors.

Barry Diller, Chairman and CEO of USA Interactive, said, “The timing in relation to
world events is an accident - as often happens with transactions, they take the time they
take to reach conclusion - however, we were of course mindful of events beyond our own
- and our decision to acquire the balance of Expedia under these circumstances does
dramatically underscore our great belief in the robust growth and long term value of
online travel. Travel may be affected by this or that event, for a day or a month or
whatever, but if there is life then there is travel - we bet on the latter.”

“We all have so much respect for Rich Barton, Erik Blachford and the superb group they
have assembled that has executed so flawlessly building Expedia into a leadership
position in online travel - we hope by this consolidation of ownership at USA that this
great Expedia group will play an ever expanding role across all our 14 Divisions.”

“This transaction gives us the opportunity to accelerate our work of building a
great travel company,” said Erik Blachford
, incoming President and CEO of Expedia.
“We are looking forward to working with USA and its other entities in a more integrated
fashion, and believe there is substantial value to be created in the process.”

USA currently owns approximately 54% of the outstanding Expedia stock and controls
approximately 94.9% of the combined voting power of the outstanding Expedia shares.
USA has agreed to vote all of its Expedia shares in favor of the merger at the Expedia
stockholders meeting relating to the merger.

The transaction, which is expected to be completed in the summer of 2003 and is not subject to any material adverse effect conditions (including the possible
effects of war).

Based on results through February, Expedia is trending toward revenue of $194 million
and adjusted earnings per share of at least $0.25 for the first quarter ending March 31.
These trends compare with Expedia’s operating budget, which calls for revenue of $186
million and adjusted EPS of $0.22.

 

Related stories on ITN:

(14/10/2002) USA Interactive Terminates Expedia Acquisition Process

(21/02/2002) Expedia & USA Networks Agreement

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