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Chicago-based Orbitz has agreed to be bought by Expedia for $1.34 billion in cash. The price is $12 per share, or about a 29 percent premium in over Orbitz’s recent trading share price. The acquisition will make Expedia the largest travel retailer in the world. Expedia has also recently bought travel sites Travelocity for $280 million and Australia’s Wotif Holdings Ltd for $612 million.
"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," said Dara Khosrowshahi, Expedia president CEO, in a statement. "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.”
While the travel industry is continuing to grow, large travel booking sites are finding new competition from travel aggregators like Kayak, Hipmunk, Google Flights and smaller more niche travel businesses offering exotic travel packages. Buying Orbitz will give Expedia a larger piece of the pie, enabling it negotiate better and more deals on behalf of its customers.
Orbitiz employs about 860 people in Chicago and is headquartered in the West Loop at 500 W. Madison Street. Expedia said it would like to keep Chicago offices and Orbitz’s employees, who it values for their knowledge of the hotel industry. Expedia CEO Dara Khosrowsha appeared to indicate that some Orbitz employees might be laid off in the short term, but over the long term they expect to grow the Chicago employee base.
“They have been growing the business, as you saw in their latest results, and for us to have a center of talent in Chicago, in the Midwest is something that, as we look at our global talent strategies, is really a terrific thing,” said Khosrowshah in a conference call. “So we're looking forward to that. We do think we're going to have a nice, big base in Chicago and hopefully grow it over the long term, along with some efficiencies that we are going to bring to bear.”
Including assumed debt Expedia’s purchase of Orbitz would cost about $1.6 billion in total. Both company boards have agreed to the deal, but the majority of Orbitz common stock shareholders still need to approve.
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