Priceline (NASDAQ: PCLN), an online travel company, will be purchasing Kayak Software (NASDAQ: KYAK) for $1.8 billion in a cash and stock deal. Priceline is an online travel agent that makes money from commissions and fees while Kayak Software permits users to search other sites for great deals and makes money from advertisements on its site. Both companies have been trying to expand globally. After the announcement, shares of Kayak increased by 27.8% on Friday to close at $39.67 with 2.5 million shares changing hands. Priceline shares declined on Friday, closing at $625.87.
Kayak has been able to post great results in the latest quarter. Moreover, Kayak has a strong online brand. Kayak and Priceline can easily develop a symbiotic relationship as they compete in related markets. Kayak processes around 100,000 enquiries a month, making this a significant source of new customers for Priceline.
Priceline has said that both companies will operate autonomously. However, even if Kayak functions autonomously, it remains to be seen if Kayak can continue to refer visitors to other travel sites after being acquired by Priceline.
Priceline has paid a 40% premium on the price of Kayak shares at the IPO. However, some law firms are initiating an investigation into the Kayak board for possible lapses in fiduciary duty.
Kayak offers an online travel search tool that is mainly focused on the U.S. market at present. Kayak competitors include Google and Microsoft. Kayak went public in July. Kayak stated in its Q3 report that net income went up 19 cents per share to $7.2 million from $4 million a year earlier. Kayak’s mobile app is also popular, which ranked 12 among Apple travel apps and 10 among Android travel apps. Kayak lets users compare prices to pick the lowest deal, while it also benefits from fees and commissions related to direct bookings using its mobile app.
Priceline is an online travel agent that obtains fees and commissions for booking hotels in the U.S. and Europe. Priceline also owns Agoda, an Asian travel site. Priceline has been expanding internationally and has a popular mobile app ranked 11 among Apple and Android travel apps. Priceline has been expanding its global reach through acquisitions. It is believed that the acquisition of Kayak will provide Priceline with a technology boost, as well as enable Priceline to acquire new customers.
While Kayak shares went up by over 27% on Friday, another online giant, Groupon (NASDAQ: GRPN), saw a reversal in values. Groupon shares declined by 29.6% to $2.76 with 104.4 million shares traded.
The day also saw the decline in the share price of Adept Technology (NASDAQ: ADEP) to $3.00, a fall of 24.6%. In all, 141,247 Adept shares changed hands.
Another major loser was James River Coal Company (NASDAQ: JRCC) that saw a decline in share prices of 19.6% to $2.70 with 5.6 million shares traded.