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News > Technology
USA to buy Expedia
July 16, 2001: 10:41 a.m. ET

Media firm buying Microsoft's stake in travel service for more than $1.5B
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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.

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Terms of the purchase, expected to close by the end of the year, call for Expedia holders to receive for each of their shares:
  • 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.
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.

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. graphic

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