Eight years after its formation and four months after a strong debut as a public company, Kayak Software Corp. will be acquired by Norwalk neighbor Priceline.com Inc. for $1.8 billion, the companies announced Nov. 8.
The deal, which was greeted favorably by investors, represents one of the largest mergers of online travel companies to date.
Under the terms of the merger agreement, Kayak will continue to operate as an independent company, Priceline Group President and CEO Jeffrey H. Boyd said in a conference call with investors.
Neither company offered a hint as to the status of Kayak”™s plans to relocate its headquarters from Norwalk to a 17,600-square-foot facility in Stamford”™s Harbor Point district.
The two companies are headquartered less than two miles apart from each other.
The transaction, which will be financed through approximately $500 million in cash and $1.3 billion in Priceline equity and assumed stock options, is valued at about $40 a share, representing a 29 percent premium over Kayak”™s closing price of $31.04 a share Nov. 8.
The deal has been unanimously approved by the boards of directors of both Priceline and Kayak, and is expected to close by the end of the first quarter of 2013 pending the approval of Kayak shareholders and regulators.
“Kayak has built a strong brand in online travel research and their track record of profitable growth is demonstrative of their popularity with consumers and value to advertisers,” Boyd said on the conference call. “They also have world-class technology and a tradition of innovation in building great user interfaces and they have used these assets to build a leading position in mobile.”
Boyd said the intention is for Kayak to be operated independently under its current management team, in line with previous acquisitions by the Priceline Group.
“With respect to technology benefits, we believe that there will be mutual benefits from sharing of best practices and technology between Kayak and Priceline and the other brands in our group,” Boyd said.
He said the Priceline Group”™s primary area of focus would continue to be in the online hotel reservations business, and added that the merger wouldn”™t result in the two companies sharing online travel platforms.
Kayak CEO and co-founder Steve Hafner said in a statement that the merger would help to accelerate the company”™s growth.
“Paul English and I started Kayak eight years ago to create the best place to plan and book travel,” Hafner said. “We”™re excited to join the world”™s premier online travel company.”
Kayak, which also reported third quarter earnings Nov. 8, said revenues were up 29 percent over the third quarter of 2011 to $78.6 million.
Spokesmen for Kayak and Priceline declined to comment on whether there would be any staffing changes resulting from the merger or whether Kayak”™s planned move to Stamford would proceed as planned.
Kayak currently employs more than 180 people at seven global locations, including at least 37 people at the company”™s Norwalk headquarters.
As part of a July 19 prospectus Kayak filed with the U.S. Securities and Exchange Commission in advance of its initial public offering on the Nasdaq stock exchange, Kayak said it had signed a 12-year lease for 17,600 square feet of office space in Stamford and that it planned to move its headquarters there from Norwalk.
The property under lease is located at 7 Market St. in the city”™s Harbor Point district, a development led by Building and Land Technology that will soon be home to hedge fund giant Bridgewater Associates, among others.
Under the terms of the lease, Kayak will pay between $800,000 and $900,000 a year, and holds two options for five-year extensions, as reported by the Business Journal in August.
Building and Land Technology is planning nearly $1 million in renovations as part of the lease deal.
Can someone explain how they value a company generating $80million in annual revenue at $1.8Billion????
There is a major disconnect here.