Priceline buys Kayak for $1.8 billion

Kayak Software Corp., the travel search company with offices in Concord and Norwalk, Conn., is being acquired by travel site Priceline.com Inc. for $1.8 billion in cash and stock, less than four months after becoming a publicly-traded company, the companies announced Thursday.

Priceline will pay $40 a share for the company, a 29 percent premium to its closing price of $31.04 Thursday and 54 percent more than its initial public offering price in July of $26 a share.

In a conference call with financial analysts on Thursday afternoon, Priceline chief executive officer Jeffery Boyd said the Kayak deal brings the company engineering talent and deep expertise in the increasingly important mobile market. “They have a great shop up in the Boston area,” said Boyd, “and we are very excited to be working with their engineers.”

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He said Priceline will focus on helping Kayak grow its business overseas, and further expanding into the hotel market. Kayak, which does most of its business in the United States, may also help Priceline derive more revenue from the domestic travel market.

Kayak reported$224 million in revenues last year, and processed 302 million users queries for travel information in the quarter ending in September, a 31 percent jump over the same period last year.

“Domestically their [Priceline’s] business is growing in single digits, because much of the growth is outside the US,” said Lorraine Sileo, a travel industry analyst at research firm PhoCusWright Inc., in Sherman, Conn. “This certainly gives them a bigger chunk of the business back in the US.”

Since it went public earlier this year, Kayak has reported strong user growth. The eight-year-old company, which had $224 million in revenues last year, processed 302 million users queries for travel information in the quarter that ended in September, a 31 percent jump over the same period last year.

While Americans know Priceline mainly through its humorous TV ads featuring William Shatner, the company developed a major presence overseas when it acquired the Dutch hotel booking company Booking.com in 2004. As a result, Priceline generates about 80 percent of its gross booking revenues from customers outside of the United States.

Adding Kayak to its portfolio will also help Priceline attract a wider segment of the market, analysts said. Priceline has 3,400 employees and raked in $4.3 billion in revenues last year,

“This is about expanding the size of the Priceline ranch, if you will, on the travel ecommerce prairie,” said Henry Harteveldt, a travel industry analyst at Atmosphere Research Group. “Priceline is great if you know where you want to go, or get savings. Kayak puts Priceline as a company further up the travel planning food chain in what’s called the inspiration phase: where can I go, I only want to spend a certain amount of money.”