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Priceline will add Kayak's profitable search tool to its reservation system.
Priceline.com has snapped up its younger rival Kayak in a $1.8 billion shares-and-cash deal, the companies announced Thursday.
Kayak Software Corp., whose websites and mobile apps allow customers to comparison shop for flights, hotel rooms and car rental bookings, only went public four months ago.
The company made $91 million in its initial public offering by selling 3.5 million shares at $26 apiece, reports Bloomberg. Kayak shareholders will receive $40 a share from the sale to Priceline.
Priceline Chief Executive Jeffery H. Boyd told the Wall Street Journal that the company was attracted to Kayak's position as a good source of leads for advertisers and its consistent profitable growth.
“It is obviously a great source of customers for Priceline,” said Andre Sequin, an analyst at RBC Capital Markets told Bloomberg.
“We weren’t really expecting it on our end. Priceline’s done very well in this space on their own, and as Kayak does serve competitors as well, it wasn’t necessarily a step we were looking for them to do.”
The deal will be the largest acquisition ever for Priceline.com. The company was founded in 1998 and acts as a travel agent and collects fees and commissions on reservations.
Kayak's focus on searching other sites to a compare prices could be a solid new revenue stream for Priceline. The engine makes most of its money from referrals and advertisers.
“I see Kayak serving as a global entree into the advertising market for Priceline,” Daniel Kurnos, an analyst at the Benchmark Company told the New York Times.
He said the deal could help Priceline “with their search rankings and give them some additional expertise in the technology department.”
Online travel sales may reach $151.9 billion by 2016 from $107.4 billion in 2011, according to EMarketer Inc.