Expedia Inc. reported that it has agreed to acquire Wotif.com Holdings Ltd. for $660 million in a deal that would allow the travel company to increase its presence in the Asia-Pacific region.
Wotif said that the company was convinced to sell to Expedia due to a volatile market that has seen growing competition.
Expedia, who owns online companies Hotels.com and Hotwire, is acquiring Wotif in a deal that valued Wotif shares at A$3.30 per share. The price represents a premium of 14 percent compared to the company's most recent closing price of A$2.90.
After the acquisition deal was reported, the price of Wotif shares increased by 24 percent to A$3.285.
Wotif, based in Brisbane, Australia, was once tagged by analysts as a high-growth stock due to its high-turnover model in discount accommodation sales.
However, the company has struggled to increase its profits as the prices of hotel rooms continue to decrease, while larger companies such as Expedia and Priceline.com continue to dominate the market with aggressive campaigns for marketing and advertising.
"It may be a little bit of a low point in Wotif's earnings cycle so in that regard (the offer) is a little opportunistic," said Daniel Mueller, an analyst at Morningstar.
The acquisition, however, remains subject to shareholder approval, with at least 75 percent of shareholders being required to vote in favor of the deal for it to push through.
Wotif said that the company's directors, which collectively hold a 20.2 percent of the company, and co-founder Andrew Brice, who holds 15.5 percent, will vote in favor of the acquisition by Expedia.
"Joining Expedia allows us to rapidly advance two of our strategic initiatives -- strengthening offshore supply and improving our customer and supplier value propositions through enhanced technology," said Wotif Group CEO and Managing Director Scott Blume.
"We believe this will help solidify our position as the premier travel brand in Australia and New Zealand, grow our business across the Asia-Pacific region and increase our exposure and brand awareness to inbound international travellers," Blume added.
Dara Khosrowshahi, Expedia President and CEO, lauds Wotif's line up of leading travel brands, and said that the acquisition will allow both companies to capitalize on the strengths of each other.
Khosrowshahi said that Wotif will add to Expedia's brands and enhance the company's supply in the Asia-Pacific region, while Expedia will expose the customers of Wotif to the company's global network and world-class systems.
