Under the Hood of priceline.com's (PCLN) Acquisition of Kayak (KYAK)

November 9, 2012 1:08 PM EST
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Price: $1,545.01 +0.39%

Rating Summary:
    33 Buy, 8 Hold, 0 Sell

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Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Yesterday's top news story was priceline.com's (Nasdaq: PCLN) acquisition of Kayak (Nasdaq: KYAK) for $40 per share in stock and cash. The deal is expected to close in the first quarter of next year, and it is already having ripple effects on the industry.

For example, shares of competitor Expedia (Nasdaq: EXPE) dropped immediately following the announcement, TripAdvisor (Nasdaq: TRIP) experienced a fair amount of chop, while shares of Obritz Worldwide (NYSE: OWW) climbed.

Commenting on the developments, analysts at Nomura said they don't expect a meaningful near-term impact on Expedia, though the long-term is "an unknown".

Expedia is Kayak's largest advertiser, so it will be important to monitor EXPE's thoughts on spending now that PCLN owns them, said analyst Brian Nowak.

Regarding TRIP, Nowak said "We struggle to see why PCLN will significantly increase its long-term spending on TRIP now, which adds an incremental risk to our 2013 TripAdvisor estimates, currently calling for non-EXPE advertising spend to grow by 20% YoY."

For priceline.com and Kayak, synergy could be generated with the growth of Kayak's international business.

"While Kayak has a strong brand and is a leading meta-travel player in the U.S., its int'l business is still small and developing. As such, we expect PCLN to leverage its leading international OTA position (and global inventory) to increase Kayak's international hotel room night selection and grow the brand and business," wrote Nowak.

In the U.S., KYAK will give PCLN a channel to grow its business.

"While PCLN downplayed this opportunity last night, in our view, it has the potential to be a material customer reach channel over time, as well as a source of traffic diversification away from Google," concluded the Nomura Report.

For an analyst ratings summary and ratings history on priceline.com click here. For more ratings news on priceline.com click here.

Shares of priceline.com closed at $627.87 yesterday.

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