Mike Isaac

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Priceline to Acquire Kayak for $1.8 Billion

Priceline will acquire Kayak.com, the travel search company, for $1.8 billion, the company announced Thursday.

The deal will be a combination of $500 million in cash and $1.3 billion in equity and options, close to a 30 percent premium on Thursday’s listed share price.

“Kayak has built a strong brand in online travel research and their track record of profitable growth is demonstrative of their popularity,” Priceline CEO Jeffery Boyd said in a statement.

The acquisition comes only a matter of months after Kayak first listed itself on the Nasdaq exchange.

Kayak was slated to post its third-quarter earnings today, only the second time ever for the newly public company. Last August, Kayak beat analyst expectations for earnings, posting revenue of $76.9 million — a 36 percent increase over the same period a year earlier — and net income totaling $7.3 million, or 19 cents a share, which is nearly double what it reported in the second quarter of 2011.

Kayak.com will remain a separate property, owned by Priceline but managed by Kayak’s existing team.

Shares of Priceline were trading down 11 points after hours, about a 2 percent drop to $616.32 per share. Shares of Kayak surged by 30 percent after hours, hitting an all-time high of $40.55 per share.

Here’s the original announcement:

Priceline.com Agrees to Acquire KAYAK Software Corporation

NORWALK, Conn., Nov. 8, 2012 /PRNewswire/ — Priceline.com Incorporated (NASDAQ: PCLN) announced today that it has signed a definitive agreement for the Priceline Group to acquire KAYAK in a stock and cash transaction. Under the terms of the agreement, the transaction values KAYAK at $1.8 billion ($1.65 billion net of cash acquired) or $40 per share of KAYAK (subject to the collar described below), with the Group paying approximately $500 million of the consideration in cash and $1.3 billion in equity and assumed stock options.

The Boards of Directors of the Priceline Group and KAYAK have unanimously approved the transaction, which is subject to customary closing conditions, including a vote of KAYAK’s shareholders and regulatory approvals, and is expected to close by late 1st quarter 2013. KAYAK’s current management team will continue to manage KAYAK’s operations independently as part of the Priceline Group of companies. The Group expects that the impact of the KAYAK acquisition on Non-GAAP EPS in 2013 will be de minimis.

KAYAK is a leading travel research site that allows people to easily compare hundreds of travel sites at once when searching for flights, hotels, and rental cars, and gives travelers choices on where to book. The company processes over 100 million user queries each month through its global websites and best in class mobile applications. “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,” said Priceline Group President and Chief Executive Officer Jeffery H. Boyd. “KAYAK also has world class technology and a tradition of innovation in building great user interfaces across multiple platforms and devices. We believe we can be helpful with KAYAK’s plans to build a global online travel brand.”
“Paul English and I started KAYAK eight years ago to create the best place to plan and book travel,” said Steve Hafner, KAYAK Chief Executive Officer and Cofounder. “We’re excited to join the world’s premier online travel company. The Priceline Group’s global reach and expertise will accelerate our growth and help us further develop as a company.”

Transaction Summary

KAYAK shareholders will have the right to elect to receive cash or stock with a value of $40 per KAYAK share, (subject to (i) the collar mechanism described below and (ii) pro ration such that the overall consideration in the deal to KAYAK shareholders will consist of one-third cash and two-thirds stock). The stock portion of the consideration will be subject to a 10% collar pursuant to which the value of the Priceline.com stock delivered to those receiving stock will be $40 per KAYAK share so long as the aggregate volume-weighted average Priceline.com trading price for the 30-day period ending 2 days prior to Closing (as set forth more fully in the Merger Agreement) is between $571.31 and $698.27 per Priceline.com share. If such average price is above $698.27 or below $571.31, those receiving Priceline.com stock will receive a fixed exchange ratio as set forth in the Merger Agreement. The final number of Priceline.com shares to be issued on a fully diluted basis will range between approximately 1.9 million and 2.3 million shares and options at closing.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik