NEW YORK (CNNfn) - USA Networks agreed Monday to buy Microsoft Corp.'s controlling interest in online travel service Expedia Inc. and to buy National Leisure Group Inc., deals USA Networks said will give it a major portion of the interactive travel market.|
New-York based media group USA Networks will buy about 33.7 million shares of Expedia from Microsoft (MSFT: Research, Estimates) and has offered to buy additional Expedia shares from any holder willing to sell. It expects to own up to 37.5 million Expedia shares, about 75 percent of the company.
Terms of the purchase, expected to close by the end of the year, call for Expedia holders to receive for each of their shares:
Microsoft's interest in Bellevue, Wash.-based Expedia could cost USA more than $1.5 billion, and the participation of other shareholders would drive the price up.
- A portion of a USA share worth $17.50;
- A portion of a warrant entitling the Expedia shareholder to buy new USA common stock at $35.10 some time in the next 7 years;
- A portion of a new USA stock with a $50 face value and a variable initial exercise price of, at most, $33.75.
USA also will buy privately held National Leisure Group and launch a new cable-TV channel dedicated to travel services, the USA Travel Channel.
Monday's transactions will help USA generate about $4 billion in gross travel bookings in 2001, the company said. The properties, together with USA's interest in Hotel Reservations Network Inc. (ROOM: up $0.41 to $51.49, Research, Estimates), will form the nucleus of the USA Travel Group portfolio, which collectively handled about 16 percent of the $14 billion in online travel transactions in 2000, USA said.
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Separately, Expedia said it expects to report fiscal fourth-quarter earnings of 20 to 23 cents a share. Wall Street analysts polled by First Call expected the company to earn only 9 cents a share.
Expedia also said it expects fourth-quarter revenue to rise about 37 percent from the third quarter and to more than double year-earlier revenue.
Expedia was launched in 1996 and was one of Microsoft's earliest forays onto the Internet. It later was spun off into an independent company, though Microsoft kept a 70-percent interest.
Expedia (EXPE: down $4.83 to $43.87, Research, Estimates) shares fell nearly 10 percent in early trading, while USA (USAI: up $1.39 to $26.65, Research, Estimates) shares were little changed.