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Expedia buying online rival Orbitz for $1.33 billion

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As the travel industry continues to consolidate, Expedia announced on Thursday that it is is buying rival online travel site Orbitz for approximately $1.33 billion.

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As the travel industry continues to consolidate, Expedia announced on Thursday that it is is buying rival online travel site Orbitz for approximately $1.33 billion.

The hefty purchase adds to the stable of brands that Expedia has snapped up recently in order to extend its reach and keep pace in the fiercely competitive travel-booking industry.

Expedia’s acquisition of Orbitz is its second major deal in the past month as the industry continues to consolidate.

The company announced the $280 million acquisition of another rival, Travelocity, in late January – and also follows Expedia’s July announcement that it was buying Wotif.com for $658 million.

By bringing Orbitz into the fold, Expedia gains access to the Orbitz namesake brand, as well as brands like CheapTickets and HotelClub. Expedia’s portfolio already consists of nearly a dozen brands, such as Hotels.com and Hotwire.

Speculation swirled last month that Orbitz may be bought, when a media report said that the company was considering selling itself. An Orbitz spokesman declined to comment at the time.

Expedia, based in Bellevue, Washington, said Thursday that it will pay $12 per share, a 25 percent premium to Orbitz’ closing price of $9.62 Wednesday.

Shares of Orbitz Worldwide Inc., based in Chicago, soared $2.05, or 21.3 percent, to $11.67 in morning trading. Expedia’s stock surged $9.23, or 11.8 percent, to $87.45.

Expedia CEO Dara Khosrowshahi said during a conference call that Orbitz was an attractive acquisition option in part because of its highly recognized brands and loyal customers. Expedia also likes Orbitz’ loyalty program, with plans to invest in it and grow it further.

Khosrowshahi, along with Chief Financial Officer Mark Okerstrom, said that the deal will help Expedia better compete for customers in a sector that is constantly seeing new players emerge.

‘We believe Orbitz can add to scale and add to our ability to run a more efficient machine,’ Khosrowshahi said.

Okerstrom said that these types of acquisitions are important, as it provides a way to avoid being overtaken by rivals like Google and TripAdvisor.

The Expedia executives said that they are very optimistic they won’t run into any major resistance from regulators on the Orbitz deal, with Khosrowshahi noting that consolidation is natural in a highly fragmented marketplace.

In a joint statement published on both companies’ websites, Khosrowshahi said ‘We are attracted to the Orbitz Worldwide business because of its strong brands and impressive team. This acquisition will allow us to deliver best-in-class experiences to an even wider set of travelers all over the world.

‘From the flagship Orbitz.com brand, to other well-known consumer brands such as CheapTickets, ebookers and HotelClub and the business-to-business brands Orbitz Partner Network and Orbitz for Business, the Orbitz Worldwide team has built a devoted customer base and we look forward to welcoming them to the Expedia, Inc. family.’

Orbitz CEO Barney Harford, meanwhile, said in the statement ‘Our mission at Orbitz Worldwide has been to build our brands to be the world’s most rewarding places to plan and purchase travel.

‘We’re excited for Orbitz Worldwide to join the Expedia, Inc. family and for our teams to work together to further enhance the offerings we provide to our customers and partners.’

Expedia is also up against competitors like Priceline Group, which owns sites like Priceline, Booking.com, Kayak and OpenTable. And there are new pressures from sites like airfare search Hipmunk and last-minute deal site HotelTonight.

The boards of both companies have approved the deal, but it still requires a nod from the majority of Orbitz shareholders. Expedia, which anticipates $75 million in savings from the buyout, said it is currently unable to project when the transaction will close.

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editor

Editor in chief is Linda Hohnholz.