kayak
744 days ago
 

Priceline buys Kayak for $1.8 billion

In a leftfield move, Priceline has agreed to buy metasearch engine Kayak for $1.8 billion.

The deal was announced at the close of the public financial markets today in New York.

The transaction values Kayak at $1.8 billion ($1.65 billion net of cash acquired, says a statement) or $40 per share of Kayak, with Priceline paying “approximately $500 million of the consideration in cash and $1.3 billion in equity and assumed stock options”.

Kayak finally managed to get its IPO off the ground in July this year, ending an 21-month wait from its original announcement in November 2010 that it wanted to go public.

The board of both companies have “unanimously approved the transaction”, the statement continues, but a vote of Kayak’s shareholders and regulatory approvals will take place shortly.

The deal is expected to close by late in the first quarter of 2013.

It also eclipses by some considerable distance the other major deal to take place in the past few years in travel technology – that of Google’s acquisition of ITA Software in the summer of 2010 for $700 million.

Kayak’s existing management team will remain in place and will run the company as an independent unit within the Priceline Group.

Priceline CEO and president Jeff Boyd says:

“Kayak has built a strong brand in online travel research and their track record of profitable growth is demonstrative of their popularity with consumers and value to advertisers,

“Kayak also has world class technology and a tradition of innovation in building great user interfaces across multiple platforms and devices.”

Perhaps central to the strategy behind the deal is in the global expansion of the Kayak brand.

Priceline says it can assist Kayak “to build a global online travel brand”, the one wrinkly area in an otherwise mostly successful Kayak story.

Despite growing quickly (including buying Sidestep) and then pretty much dominating the US travel search scene through the 2000s and up to its IPO this year, Kayak has not made much of a dent outside of North America.

Kayak bought European travel search brand Swoodoo in early-2010 for an undisclosed fee, but elsewhere in Europe it has struggled against the likes of Skyscanner et al.

Given Priceline’s extraordinary success with acquisitions such as that of Booking.com (considered by some to be the most profitable travel deal of the 2000s), perhaps Kayak’s rivals elsewhere around the world will finally consider it a significant threat.

Kayak CEO and co-founder Steve Hafner adds:

“Paul English and I started Kayak eight years ago to create the best place to plan and book travel.

“We’re excited to join the world’s premier online travel company. The Priceline Group’s global reach and expertise will accelerate our growth and help us further develop as a company.”

UPDATE:

So, if international is to become a focus, what does one of Kayak’s significant competitors think about the deal?

Skyscanner CEO Gareth Williams says:

“I’m delighted to see the success of Steve Hafner and Paul English and the Kayak team. Online travel is hugely competitive and yet they have helped transform the market and create benefits for travellers and shareholders alike.

“ITA was a good acquisition for Google and I have no doubt Kayak will be a great Priceline brand. At Skyscanner we relish the ever increasing competitive challenge to be relevant, useful, fast and comprehensive to all travellers worldwide.”

 
 
Kevin May

About the Writer :: Kevin May

Kevin May is editor and a co-founder of Tnooz. He was previously editor of UK-based magazine Travolution for nearly four years and web editor of Media Week UK from 2003 to 2005.

He has also worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology and a postgraduate diploma in magazine journalism.

 

Comments

  1. Jack Feuer

    Priceline (PCLN) buying Kayak (KYAK) makes a lot of sense and has broad implications for the travel eco-system. Here’s DMW’s take on this deal.
    http://blog.digitalmarketingworks.com/2012/11/pcln-gobbles-up-kyak_9.html

     
  2. Dorian

    You’re right, it’s great for Kayak. It’s commendable that you can find it in yourself to congratulate them. That didn’t even occur to me.

    But yes you are missing something. These guys all sell rooms at the same price. There’s nothing to be gained by Expedia jumping off Kayak and trying to lure the consumer in elsewhere. They’ll just have to hang in there and sweat.

     
    • John

      Yes but if Kayak fails, Priceline’s stock goes down. If PCLN stock goes down, expedia’s goes up so I think they would gain something from it. Price fixing aside the big players still want to beat each other.

      Be interesting to see how long Kayak keeps using EAN.

       
  3. John

    This is incredible for Kayak and people are right to be congratulating them but like Dorian I don’t think its good news for anybody else. An OTA owning a meta search site can’t be good for consumers and I can only think it would hamper the growth of the Kayak brand as they try to forge new partnerships, especially in Europe.

    I imagine a huge amount of kayak’s revenue comes from Priceline’s competitors so surely it only takes Expedia and Travelport to pull out of kayak to seriously dent its revenue and its ability to serve comparative hotel/ package rates? I’m sure expedia would happily absorb the loss of bookings via Kayak in order to take a dent out of priceline. Or am I missing something?

     
  4. Dorian

    “most meta searches in general are not really comparative as they already prefer their connected partners”

    Agreed. Which is why the biggest metasearch tying up with the biggest O.T.A. is a very concerning prospect. Neither of them will be seeking competition.

    I can’t understand why there are so many positive comments about this move. It’s just further evidence, if any were needed, that the travel industry is monopolised by a few big players.

     
    • Sean

      Dorian,

      If what you say is true, sounds like a perfect opportunity for the competition or someone new to come along and better serve travelers needs!

       
  5. Dorian

    You’d hope and expect a metasearch site to go out of its way to undermine B.A.R. rates and bring to consumers the best range of prices. Kayak now has absolutely no incentive to do so. Quite the opposite.
    It’s business model is simply to push up advertising prices and squeeze the hell out of Priceline’s competitors.

    It’s also an ideal way for Priceline / Booking.com to keep tabs on any companies undermining B.A.R. rate through easy access to its competitor’s prices.

     
    • Martin Rusteberg

      PCLN already has extensive rate shopping in place without access to KYAK, no worries, there…

      and in regards to undermining BAR rates – that should not be the work of a meta search – it should just display available prices…

      as pointed out in my previous comment – most meta searches in general are not really comparative as they already prefer their connected partners, not only KYAK.

       
  6. Dorian

    This is truly disturbing news. If it hasn’t already been referred to the competition authorities it should be.

     
    • Kevin May

      Kevin May

      @dorian – why?

       
    • Martin Rusteberg

      Why should it be disturbing?

      KYAK would destroy it’s business if it were to preference PCLN companies other than through their bidding (although that actually is an issue with ALL meta searches and calls for a competitor that is unbiased).

      Currently, PCLN is probably already KYAK biggest account (I did not read their filings) and it just makes sense business-wise to keep the cash flow within the group.

       
  7. Wouter BLOK

    Great achievement by the Kayak team, congratulations! The Powerhouse just got bigger. It is mind boggling to think about all the opportunities in data sharing, circeling traffic around, competitor intel on rates&availability, etc. In the end I’m sure the traveler will win by the increased competition.

     
  8. Henry Harteveldt

    Priceline just got themselves many dozens of talented, hard-to-come-by software engineers and developers. Yes, the brands are both great. yes, there are possible symmetries between the two. Yes, this reflects the challenges OTAs face and the value metasearch players have with direct-to-supplier booking. But this is very much about Priceline’s ability to rapidly expand the breadth and depth of its tech team.

     
  9. steve sherlock

    woah – well I guess if you want to firewall your portfolio against the potential of sites like Google.Travel and Bing.Travel – then this seems like a brilliant move by Priceline and validation of Kayak’s vision.

     
  10. Ryan Ornelas

    Smart move, look at what happened to Zillow.com stock when Trulia.com (another competitor) entered the public market. Instead of losing a 1.8 billion value, Price Line just increased its quarterly revenue by 100 million!

     
  11. Peggy Lee

    What a great move by Priceline and what a great exit for my friends at Kayak! Steve Hafner you are the Rock Star of the Year in the travel industry! I knew Kayak would do very well even after the Google/OTA deal… and what a great acquisition by Priceline. Mr. Boyd creases to amaze me. The combination of Kayak and booking.com with tremendous. The incorporation of Kayak search capabilities into Priceline.com will make other OTA squirm. And I look forward to white labeling the new combo.

     
  12. Chicke Fitzgerald

    Bravo! Love a good entrepreneurial exit.

     
  13. Sean

    Im surprised Priceline didn’t buy them earlier. Leverage that high stock price. I think those Priceline folks are smart! Cheers to them.

     
  14. Psycho

    Fun fact: Both are located in Norwalk, CT., about a 5-10 minute ride from each other. Priceline is located almost on the Darien border and Kayak is nestled in South Norwalk (SoNo). I gotta believe this proximity lead to board member and executive coziness.

    Fun fact #2: Founders are co-founders of travelocity, expedia and orbitz. It’s a tightly knit yet competitive biz

    Source: http://news.ycombinator.com/item?id=4759841

     
  15. Pete Meyers

    As I articulated earlier today on Twitter: “holy crap.”

    Hats off to Priceline for making such a bold move and congrats to the squad at Kayak. Sure am curious to see if this winds up being a portfolio addition a la Booking.com or something else.

     
  16. Michael

    I’m not sure how I feel about this just yet. Buying a company that ultimately gives a percentage of its business to your competitors is a strange move. Looking forward to seeing what the plans are there.

     
    • Colin

      OTA vs Meta-search…wouldn’t a bigger concern be that Kayak begins giving preference to Priceline?

      Doubt that will happen though. I think this might be Priceline admitting that OTAs are losing relevance as Meta Search begins to shift to direct bookings.

       
    • TravelSheryl

      How is that any different than what Priceline retail does?

      As an aside, they are both in Norwalk, CT.

       
      • Peggy Lee

        It’s much different. They are two different animals right now. Priceline can use the advantages of Kayak’s meta search in priceline.com, and if they wanted could imbed Kayak’s meta search for air ad car into booking.com. And the synergies of Kayak.com with booking.com and other Priceline corporate content is a big staggering to think about. To put it in context, I know Expedia is not very happy about things today.

         
  17. heddi cundle

    Huge congrats to Kayak…and Priceline :)

     
 
 

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