US online travel company, Expedia, has announced that it is buying Australia’s Wotif.com Holdings Limited (ASX: WTF), in a deal worth around $700 million.
Wotif has a number of leading Australasian online travel brands, including wotif.com, lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com as well as GoDo.com.au an adventure activity site.
Shareholders are being offered $3.06 per share, plus a 24 cent special dividend, valuing the company at $703 million, including listed shares and options. Including franking credits, shareholders will receive $3.40 for each share they hold.
Directors and founder Andrew Brice, who together control 35.7% of the shares in Wotif, have agreed to sell up to 19.9% of their shares to Expedia.
As Wotif chairman Dick McIlwain noted in the announcement, “As a board we have carefully assessed the changing dynamics of the markets in which we operate, and the uncertainties and risk that we face as an independent company. The Expedia group is well placed to leverage and support our strong brands, operations, people and customer relationships in an online travel market that is becoming increasingly global.”
Wotif has struggled to generate significant levels of growth in recent years, as its markets in Australasia matured. Entry into flight bookings hasn’t delivered the growth the company was after, and an increasingly global online travel booking market has made life difficult for the small (relatively) Australian operator. As a result, net profit has fallen in the past two years, and is expected to be lower again this financial year.
But the deal gives Expedia entry into the Australasian market it has been searching for, and gives Wotif some decent financial firepower to expand and grow its brands beyond our shores.
All eyes will now be on competitor Webjet Limited (ASX: WEB). The company recently confirmed its 2014 financial year earnings forecast of $21.5 million, and says it increased its lead in visitations in the online travel agency category from 12.94% to $13.21% in April this year. But Expedia and its major competitor, US booking giant Priceline may well be sniffing around the travel booking site now. Helloworld Ltd (ASX: HLO) ex-Jetset Travelworld and Flight Centre Travel Group Ltd (ASX: FLT) may also come under the microscope.
You may have missed out on Wotif, but that doesn’t mean you can’t get rich from investing in shares…