US online travel-booking service Expedia will buy the struggling Wotif.com (WTF) for $703 million, a sign that the online challenge to the local travel giant Flight Centre (FLT) has all but collapsed.
The Expedia offer of $3.30 a share (which grows to $3.40 including the franking credits) represents a 25% premium to the prevailing share price, but is well under last year’s high of $5.63.
The base offer is $3.06 a share from Expedia and also receive a special dividend of 24 cents.
Wotif shares closed at $3.30, up 25%, on the ASX yesterday.
So weak has Wotif’s performance been that the $3.30 a share offered only takes us back to late 2013 when the shares were plunging after a profit warning in late December.
In other words, Wotif, which was once a market darling with its supposedly low cost online business model, had become something of a market flop.
WTF vs WEB vs FLT 2Y – Flight Centre soars as Webjet, Wotif hit turbulence
In contrast Flight Centre has survived and now sits atop the sector in Australia. Its decision to reject a private equity buyout attempt back in 2006-07 at $17.20 a share has been well and truly vindicated.
"Wotif Group will add to our collection of travel’s most trusted brands and enhance our Asia-Pacific supply," Dara Khosrowshahi, chief executive officer of Bellevue, Washington- based Expedia said in a statement. "Wotif Group is well positioned in the Asia-Pacific region with a portfolio of leading travel brands."
The offer has been a long time coming as Wotif has gradually found the competition in online accommodation (and lately, air travel) increasingly tough, along with growing costs of upgrading its technology platforms to get greater efficiencies.
A couple of profit downgrades and a very weak interim report in February also did help the share price remain buoyant.
The shares plunged from the high of $5.63 last year to a low this year of just over $2 a share.
Co founder Graeme Wood, who is backing the Guardian Australia website, will get around $140 million from the offer.
The bid raises questions about the future of other online travel groups, such as Webjet which last year bought the Singapore, Hong Kong and Dubai based online travel agency Zuji.
The former Fairfax-owned site Stayz was sold to US group HomeAway in December last year for $220 million.
And through all of this Flight Centre, the company Webjet and Wotif (and no doubt Expedia) were supposed to run out of town, has prospered and grown to where it now dominates the travel business in this country, with growing operations off shore, and online.
Wotif shares were steady on $47.10 yesterday, having peaked at more than $55 a share a few months ago.
The shares were trading at just over $44 a share in late 2013 when Wotif shares plunged from more than $4.10 a share to just over $2.60.
Webjet shares rose 6% to $2.68, the highest they have been for around two months on speculation it will be taken over as well.
