April 10, 2003 6:35 AM PDT
USA Interactive books Hotels.com
USA Interactive, which owns about 68 percent of outstanding Hotels.com stock, on Wednesday announced that it would acquire the online hotel booking company in a stock swap worth about $1.1 billion.
Under the terms of the deal, Hotels.com shareholders will receive 2.4 shares of USA Interactive common stock for each share of Hotels.com stock they own--that's approximately a 20 percent premium based on the closing price of the two companies' stock on March 18. The following day, USA Interactive acquired the remaining shares of Expedia.com, the travel booking site, in a stock deal worth about $3.3 billion.
These acquisitions come at a challenging time for the travel industry, with individuals and corporations curtailing travel plans because of war in Iraq and the outbreak of SARS (severe acute respiratory syndrome) in Asia. American and foreign carriers have slashed the number of flights--and several have filed for bankruptcy.
But USA Interactive's chief executive, Barry Diller, seems unfazed by the turbulence in the industry. At the time of the Expedia acquisition, Diller said, "Where there is life, there is travel."
USA Interactive owns or holds large investments in electronic retailing sites such as HSN.com and services such as Ticketmaster.
The company said the transaction represents the final step in its efforts to simplify its corporate structure by buying its public subsidiaries. The deal, however, would not change the current operating structure of Hotels.com. USA Interactive said it will operate Hotels.com and Expedia separately, though it will review its strategy over time.