Skyscanner sells to Ctrip for $1.75 billion

Chinese online travel giant Ctrip has made a huge move into the international marketplace with a $1.75 billion takeover of travel search site Skyscanner.

The deal, which is a combination of mostly cash and then some Ctrip stock to Skyscanner shareholders, is expected to close within the next four weeks.

Ctrip’s intentions behind the deal are clear, with co-founder and executive chairman James Liang saying the acquisition will “complement our positioning at a global scale”.

The announcement came at the same time as Ctrip released its 2016 Q3s –  net revenues of RMB5.6 billion (US$836 million) with an operating income of RMB447 million (US$67 million).

But analysts on the earnings call were keen to find out more about the Skyscanner deal.

Liang believes “[Skyscanner’s] margins will gradually improve as we increase market share and achieve scale”. Recently appointed CEO Jane Sun chimed in that Skyscanner margins usually come in at around 20-25% and that the business was profitable.

As well as its healthy margin profile, the Skyscanner team also got the Ctrip’s CEO seal of approval. “They are strong, very lean, quick learners and have been very aggressive in expanding their brand and services.”

But Ctrip execs also hinted at the synergies between Ctrip and Skyscanner, with Sun saying:

“We will leverage our [Ctrip’s] tech and booking capabilities to help Skyscanner improve, for example, cross-selling to drive its growth as a more comprehensive travel search offering…In China, Ctrip does have a price comparison service but it is on the back-end, providing booking services, so the businesses are complimentary…We feel if our booking capabilities are passed on to the Skyscanner team, the synergies will be great.”

The repeated references to “booking capabilities” hints at something to watch as Skyscanner and Ctrip start working together.

The most direct question on the call elicited the most revealing answer, when one of the analysts asked about the future relationship between Skyscanner and Travelfusion, the UK-based B2B content aggregator in which Ctrip took a majority stake at the start of 2015. Sun talked in general terms about both businesses being technology driven with “almost all services empowered by the back-end to go global.”

But the specifics came from CFO Cindy Wang:

“Skyscanner as a metasearch is at the higher end of the traffic funnel while Travelfusion is more on the supply side. We have a plan that Skyscanner will gain access to Ctrip’s flight and also Travelfusion’s product offerings.”

The deal follows the company’s $180 million investment in Indian online travel agency MakeMyTrip earlier this year and its recent backing of three tour operators in the US.

Skyscanner was also busy in January this year when it secured a $192 million funding round from global fund manager Artemis, investment provider Baillie Gifford, Malaysian government funding house Khazanah National Berhad, online specialist Vitruvian Partners and Yahoo Japan.

The investment pegged the company’s valuation in the region of $1.6 billion.

Sequoia Capital was also a financial backer of Skyscanner back in 2013.

CEO and co-founder Gareth Williams says Skyscanner, which will remain an independently run division of Ctrip, can “learn a lot” from its new owner, not least because he feels that the business has plenty of room for growth.

“Organising travel has a long way to go before being solved,” he says, but to help do so “requires powerful technology and a traveller-first approach”.

Skyscanner has around 60 million monthly users and is available in 30 countries, with Europe its strongest market.

By amazing coincidence, Ctrip’s deal to acquire Skyscanner comes almost four years to the day since the Priceline Group bought Kayak, and for a similar amount at $1.8 billion.

Some speculators argued that Skyscanner might make a handy target for the Priceline Group to shore up its metasearch business in Europe and Asia-Pacific, where Skyscanner is beginning to make in-roads.

In a way, though not directly, it has.

The Priceline Group has a minority stake (15%) in Ctrip following two significant investments ($500 million and $250 million) in the company over the course of the last two years.

Rival travel search service Momondo says the deal is “further validation of our belief that metasearch is very attractive sweetspot in travel, based on building a trusted product for users”.

Group CEO Hugo Burge adds:

“Although we’re focused on our own growth as now the world’s only independent metasearch, we’ll be following further developments with interest – especially with regards to how they build out on their recent forays in to chat-based services and AI, a key differentiator in the Asian market.”

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Kevin May

About the Writer :: Kevin May

Kevin May was a co-founder and member of the editorial team from September 2009 to June 2017.

 

Comments

  1. Timothy O'Neil-Dunne

    Firstly congrats to Gareth, Bon and Barry. This is a great success story for British Innovation. It is interesting that the web of relationships puts the 3 major metasearch firms into the same family. Tuija acquired Qunar last month and they have a relationship. Priceline owns Kayak and a bit of CTrip. That however is also a bit disquieting as we see massive players dominating OTA, Homestay, Search etc. 25 years ago – not a single player in travel had more than 1%. Cheers

     
    • Kevin May

      Kevin May

      @timothy – from our subsequent research, we reckon this deal represents the fourth biggest ever for a UK tech company, behind those for ARM (Softbank for £24BN), Autonomy (HP for £7.4BN) and Telecity (Equinix for £2.35BN).

       
 
 

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