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Here’s why the Holdings Limited takeover offer is resting on a Kiwi cliffhanger

Online travel aggregator and retailer Holdings Limited (ASX: WTF) today announced that the New Zealand Commerce Commission has delayed the announcement of its decision to approve the takeover of Wotif by U.S. travel giant Expedia Inc (NASDAQ: EXPE). Expedia is offering Wotif shareholders $3.06 per share alongside a special fully franked dividend of 24 cents per share, which effectively values the group at $3.30 per share.

Today the stock went without the rights to the special ex-dividend of 24 cents per share, which explains the price drop of around 7% to $3.06 per share.

No direct explanation has been provided for the delay in the NZ Commission decision which is now expected on October 21.

After Australia’s anti-trust regulator The Australian Competition and Consumer Commission (ACCC) approved the deal in early October, approval across the Tasman was considered little more than a formality but the unexpected delay is not ideal for shareholders.

So should Wotif shareholders be worried?

It’s not impossible that the NZ Commission rules that the deal would restrict competition in the NZ travel market too much, although it seems unlikely.

On August 8 the NZ Commission issued a statement of preliminary issues that it considers to be important in deciding whether or not to grant clearance. The basic issue to consider is whether the acquisition is likely to result in a substantial lessening of competition. Many accommodation providers argue for example that if aggregated travel providers become too powerful then they are able to charge higher commissions to the hotels, which means end costs are passed onto consumers.

Furthermore, if the NZ Commission decides that the deal adversely impacts the ability of New Zealanders to search, compare and book travel products globally, or adversely impacts the ability of hotel operators in their advertising, listing and travel booking services then it may reach a price-crunching conclusion for Wotif shareholders.

The market is clearly expecting the deal to be approved. Given the limited upside and potentially significant downside Wotif looks one to watch from the sidelines.

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Motley Fool contributor Tom Richardson has no financial interest in any company mentioned. You can find him on Twitter @tommyr345

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