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Has Pricelline Group Inc (NASDAQ:PCLN) Overpaid To Buy Open Table Inc (NASDAQ:OPEN)?

Boston, MA 06/16/2014 (wallstreetpr) – The definitive agreement reached by online travel company Priceline Group Inc (NASDAQ:PCLN) with Open Table Inc (NASDAQ:OPEN) to buy the company for about $2.6 billion in cash raised a question whether the online travel company has paid a higher premium than it commands. However, there is no doubt that the acquisition allows Priceline to extend its business model into restaurant reservations.


Pricelline Group Inc (NASDAQ:PCLN)’s acquisition price of $2.6 billion represents 46.24% premium over June 12 closing price of $70.43, which meant market capitalization of approximately $1.66 billion. The gap of nearly $1 billion has obviously made many analysts and investors to think that the online travel company has paid more premium than it deserves.

However, looking at the yearly high price of $87.48 recorded byOpen Table Inc (NASDAQ:OPEN) stock on November 18 last year that meant market capitalization of approximately $2.06 billion, the purchasing price represented a premium of 17.74%. Compared to the 52-high price before the acquisition news broke out, the June 12 closing price of Open Table represented a discount of approximately 19.5%.

Apparently, Pricelline Group Inc (NASDAQ:PCLN) would have been pressured to offer a premium over the yearly high price. The online travel company seems to have taken calculated steps of not leaving the discussion table over the pricing issue and preferred to proceed on future growth opportunities since it is sitting with cash and short term investments of over $6 billion at the end of the first quarter. Its recent growth also came through acquisitions.

Extending Business

Since Pricelline Group Inc (NASDAQ:PCLN) is offering travel reservation through online, Open Table Inc (NASDAQ:OPEN)’s bouquet of over 31K restaurants serving in excess of 15 million diners a month is considered a natural extension into marketing services of the restaurant. Open Table has also provided over 125 million diners seat globally through its mobile solutions. The company believes it will provide a high value added booking experience to its international customers.

Priceline hopes to complete the tender offer to buy all shares by the third quarter of the current year. However, the company failed to provide what kind of synergies that both the companies will be able to get due to this acquisition.

Published by Fiona Gibson

Fiona is a finance graduate and an expert in analyzing market trends.

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