How the Orbitz Expedia deal came together
When Orbitz Worldwide announced a proposed acquisition by Expedia Inc last month, it had reached the end of a long series of attempts to try to sell itself, the Chicago-based company revealed in a regulatory filing today.
Since September 2014, Orbitz Worldwide has been trying to sell itself, talking with 15 entities — foreign and domestic, industry and financial — before settling on Expedia in a $1.43 billion transaction.
In October 2014, the company’s board decided it would only reach out to potential strategic acquirers, deferring contacts with financial sponsors, “which were viewed as unlikely to offer as significant a premium to the company’s trading price to the company’s stockholders.” But that changed in the wintertime.
OWW goes a-wooing
Surprisingly it wasn’t until late in the day that Orbitz executives and representatives reached out to Expedia, which in turn only became serious about negotiations on December 16.
At that time, only one other company, which has not been revealed, had put forward a serious acquisition proposal.
On January 6, Tnooz published a story reporting that talks were underway.
In light of the Tnooz article, in anticipation of receiving unsolicited inbound contact from financial sponsors and after consultation with Qatalyst Partners, Orbitz determined to expand the sale process to include financial sponsors.
Three financial sponsors were identified and representatives of Qatalyst Partners contacted the first three of these parties the next day to gauge their interest in a potential acquisition of the company.
Throughout January 2015, Orbitz received inquiries from 11 additional financial sponsors regarding a potential acquisition of Orbitz.
It chose three to participate in the sale process because, essentially, the seriousness of their proposals.
On January 12, another strategic buyer came forward. Additional industry offers were made.
Expedia’s initial offer was for $10.50 a share.
But on January 30, an unnamed potential strategic acquirer made a matching offer. Negotiations led to a final counterbid from Expedia of $12 a share.
The interloper’s offer forced Expedia to pay about $179.5 million more than it had intended for Orbitz.
Expedia’s final offer was also 48% over the $8.11 closing price per share of our common stock on January 5, the last trading day prior to the publication of Tnooz’s story on a possible strategic transaction involving the company.
Should he quit, Orbitz CEO Barney Harford could earn a severance package worth $19.7 million — $3,460,000 in salary and $16.2 million in Expedia stock.
Perhaps the biggest individual investor beneficiary of the deal who is not employed by the company is Brad Gerstner, sole owner of Altimeter Capital Management, which owns a fund that has 274,000 shares.
If Orbitz breaks off the deal, it would have to pay Expedia $57.5 million, it was disclosed in the filing. If Expedia can’t get regulatory approval, it has to pay Orbitz $115 million.
As is typical, the proposed acquisition has spawned a half-dozen putative stockholder class action lawsuits that the deal is unfair in various ways.
Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.