Priceline Buys Kayak, Consolidating Online Travel Brands

A big deal today in online travel, with competitive implications for companies from coast to coast:, a stalwart of the industry, is buying up newer competitor Kayak in a cash-and-stock deal worth about $1.8 billion.

It’s a pretty quick sale for Kayak, which just made its public-market debut this summer. Both Priceline (NASDAQ: PCLN) and Kayak (NASDAQ: KYAK) have corporate headquarters in Norwalk, CT, while Kayak also has an engineering office in Concord, MA, where co-founder and CTO Paul English is based.

The deal highlights the strength of New England in consumer travel tech, with Google-owned ITA Software located in Cambridge, MA and TripAdvisor in Newton, MA. Another strong region for online travel tech is the Pacific Northwest, with Bellevue, WA-based Expedia, Microsoft’s Bing Travel (via the acquisition of Farecast), and Seattle’s Yapta.

Priceline focuses most intensely on the hotel portion of travel booking, while Kayak has served as a search portal and aggregator of travel booking options. In a conference call, Priceline executives said they didn’t expect the acquisition to affect Kayak’s agreements with other online services, and also said the deal shouldn’t be read as an attempt by Priceline itself to get more heavily into the airfare market. Priceline CEO Jeffery Boyd also singled out Kayak’s prowess in mobile.

In its announcement of the deal, Priceline said it would pay $500 million in cash and $1.3 billion in stock and options for Kayak. That amounts to a price of $40 per share for Kayak, an 8 percent premium over the smaller company’s 52-week high stock price. Kayak also just reported its third-quarter financial performance, earning $8 million on revenues of almost $79 million, both increases from a year earlier.

Priceline said the current Kayak management team would continue to run Kayak as an independent subsidiary of the larger company. There was no immediate word if any layoffs were expected as part of the acquisition.

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