CHICAGO (Reuters) -
InterActiveCorp, media mogul Barry Diller's e-commerce company, said Monday that it agreed to buy online discount travel Web site Hotwire.com for $665 million in cash to expand its travel services business.
New York-based InterActiveCorp, which has been actively buying up a variety of online companies, said it expects the deal to add "slightly" to its 2004 earnings per share.
InterActiveCorp, which also owns Expedia and Hotels.com, will control three of the ten most-visited Internet travel sites with the Hotwire acquisition, according to comScore.
"Overall, it's a nice complement to the travel portfolio," Legg Mason analyst Tom Underwood said of Hotwire. "The valuation is reasonable, the company is rapidly growing."
Legg Mason and its affiliates own more than 1 percent of IAC's outstanding shares, Underwood said.
IAC (IACI: down $1.21 to $35.04, Research, Estimates) shares fell 3 percent on the Nasdaq around midday on Monday. The tech-laden Nasdaq composite index was 1.6 percent lower.
Last month, Diller said the company was seeking ways to best use its $5 billion in cash and anticipated an acquisition or series of acquisitions in the $1 billion range.
IAC agreed in May to buy Internet-based loan provider LendingTree to gain a foothold in online financial services and last month completed its acquisition of Expedia.
The company also operates the cable shopping network HSN, ticket retailer Ticketmaster and online dating service Match.com.
The closely held Hotwire was founded by Texas Pacific Group and a group of airlines that include American Airlines of AMR Corp. (AMR: down $0.28 to $12.43, Research, Estimates), America West Airlines (AWA: up $0.11 to $10.57, Research, Estimates), Continental Airlines (CAL: down $0.17 to $17.41, Research, Estimates), Northwest Airlines (NWAC: down $0.38 to $10.55, Research, Estimates), UAL Corp.'s United Airlines and US Airways Group. The San-Francisco based online travel service allows customers to see and choose a specific discounted fare or rate without knowing the brand of the supplier.
The Hotwire deal is expected to close during the fourth quarter of 2003, subject to customary regulatory approvals, IAC said. IAC will assume about $20 million in options and warrants as part of the acquisition.
The company said it expects Hotwire to have full-year gross bookings of about $700 million for 2003 and net revenue of about $110 million.
InterActiveCorp also said it was forming a single travel division, called IAC Travel, which will consist of businesses including Expedia.com, Hotels.com and its affiliated brands and Hotwire, among others.
Erik Blachford, the president and chief executive officer of Expedia, will lead IAC Travel as president and CEO.
In the second quarter, InterActiveCorp posted a net profit of $92.9 million and a 38 percent jump in revenue.
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