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Expedia Buys Vacation Wholesaler

Online travel merchant Expedia Inc. bolstered its vacation line by acquiring a vacation wholesaler from Classic Vacation Group Inc. for $52 million in cash and stock.

Classic Custom Vacations is a CLV unit that wholesales vacation packages to Hawaii, Mexico, North America, Europe and the Caribbean. The deal enhances Expedia's custom vacation package business. CLV will be liquidated after the purchase.

Bellevue, Wash.-based Expedia said the deal involves payment of $5 million in cash and the retirement of about $47 million of Classic Vacation Group debt using Expedia common stock while assuming net liabilities of about $30 million.

Expedia stock was up $1.45 on the news, to $44.66 in mid-day trading.

Expedia said CCV expects to report a profitable 2001, with approximately $300 million in gross travel sales.

"The custom vacation packaging business is an area of growth and focus for us," said Richard N. Barton, president and CEO of Expedia. "The acquisition brings to Expedia new relationships with premier properties in Hawaii and other sunny destinations. Additionally, by bringing our leading-edge database and vacation packaging technology to Classic's travel agents, we believe we can help them accelerate their sales."

Ron Letterman, president of Classic Custom Vacations, will remain as president of the unit, which becomes a division of Expedia. Classic's offices will remain in San Jose, Calif. Classic Custom Vacations started developing its tour operator business in Hawaii more than 25 years ago.

After the sale of Classic Custom Vacations, Classic Vacation Group has agreed to liquidate and distribute remaining assets to CLV shareholders. In connection with the Expedia transaction, Three Cities Research Inc., the company's principal note holder, and Thayer Equity Investors III L.P., the company's principal shareholder, have agreed to provide a payment of 26 cents per share to CLV's public shareholders. CLV stock was trading unchanged at 25 cents today.