The U.S. largest online travel agent – Priceline Group Inc. revealed that it intends to make a $500-million investment in Ctrip.com International Ltd in an attempt to expand the reach of the two companies at the Chinese market.
Mr. Darren Huston, who is the Chief Executive Officer of Priceline Group Inc. commented for Bloomberg: “It’s like putting products on the shelf. If you put more products on the shelf, it enhances the value of the store.” Mr. Huston also added: “Our primary way of growing as a company has and will be organic growth, and the commercial side of this deal is critical to helping us keep up the fast pace of organic growth.”
Priceline Group Inc. and Ctrip made an official statement that they have been working in commercial collaboration for two years now, and intend to boost their cross-promotion of each companys hotel inventory and other travel services.
The $500-million investment will be made through convertible bond, combined with the right to purchase shares of Ctrip on the open market over the next 12 months. About 10% stake in Ctrip would be held by Priceline through the combination of shares and convertible bonds. The U.S.-based company will also get the right to appoint an observer to the board of Ctrip.
Ctrip is currently known as the largest travel website in China. The company is also trying to expand its hotel-booking business, while on July 30th it reported a 38% jump in second-quarter sales to about $276 million.
The agreement between the two companies comes after the restaurant reservation website operator Open Table Inc.s acquisition of Priceline Group Inc. less than two months ago. The price of the deal was estimated at $2.6 billion. The takeover was provoked by the companys wish to bolster its presence at the online travel industry outside the territory of the U.S.
Priceline Group Inc. was 0.05% down to close at $1,280.57 per share yesterday. The shares of the company have returned investors +36.9% in the past twelve months, giving it a market valuation of $67.14 billion. According to the information published on CNN Money, the 26 analysts offering 12-month price forecasts for Priceline Group Inc. have a median target of $1,475.00, with a high estimate of $1,575.00 and a low estimate of $1,200.00. The median estimate represents a +15.18% increase from the last price of $1,280.57.
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