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Travel sites could ally to keep ITA independent

By D.C. Denison and Beth Healy
Globe Staff / June 30, 2010

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Several travel and search website companies, along with Microsoft Corp., are banding together in an attempt to buy Cambridge travel technology company ITA Software Inc. from under the nose of Internet giant Google Inc., according to people involved in the discussions.

In April, Google was reported to be seeking an acquisition of ITA, but there has been no announcement of a deal. ITA has been seeking $1 billion, but Google’s offer was around $700 million.

Microsoft, Kayak.com, Expedia Inc., Travelport, and the European online travel service Amadeus could be part of a new consortium looking to keep ITA as it is — an independent maker of software used by many companies, according to the sources, who were not authorized to speak about the effort.

The Kendall Square company makes sophisticated software for major online travel services such as Orbitz.com and Kayak.com and carriers such as Continental Airlines Inc. and Air Canada. These companies depend on ITA software, which allows them to organize complex fare information for online shoppers.

None of the involved companies would comment yesterday, but Henry H. Harteveldt, principal airline analyst for Forrester Research Inc. in Cambridge, said that ITA is “certainly an attractive target.’’

“ITA is group of very smart people doing a very specialized type of calculation,’’ he said.

The bidding on ITA Software Inc. has become heated since it was first re ported that Google was negotiating with the company. Two investors involved in the talks confirmed that a number of online travel companies, including Kayak.com, have expressed interest. They said camps of interest were evolving, with various parties aligning to prevent Google from taking over ITA. Microsoft, whose Bing search engine is among ITA’s customers, could flex its muscle as part of the consortium or on its own.

Yesterday, a story in The Wall Street Journal said that so far, ITA has agreed to hold exclusive talks with Google and has not given any of the other bidders access to its financial information.

Based just a few blocks away from Google in Kendall Square, ITA has 500 employees, according to its LinkedIn page. In 2006, it raised $100 million in venture capital, one of the largest venture capital deals of that year, in a round led by Battery Ventures of Waltham. Another local venture firm, General Catalyst Partners of Cambridge, is an investor in both ITA and Kayak.com.

Adding to the complexity of a deal between Google and ITA is possible scrutiny by US antitrust regulators, because it would combine the largest search company with a dominant travel search site. But Forrester’s Harteveldt said “there’s no guarantee’’ that an ITA purchase by any of the interested companies would survive antitrust scrutiny. He added that ITA has to carefully consider the impact of a sale on its current customers, some of which might not want to do business with the company if it is owned by a competitor. ITA’s airline customers, for example, might not want to buy its services if the company is owned by Expedia, which competes with airline sites for consumer reservations.

A consortium would solve the competition problem and allow ITA to retain its clients, Harteveldt said. The arrangement would also be likely to reduce the concerns of antitrust regulators, as ownership would be distributed among several companies.

But a consortium plan also has a “significant downside,’’ Harteveldt said.

“Not all of the companies in a consortium are likely to share the same interests,’’ he said, which could create “a management nightmare’’ for ITA executives.

D.C. Denison can be reached at denison@globe.com, and Beth Healy can be reached at bhealy@globe.com.