Priceline.com Gets $50 Million Cash Infusion
Name-your-own price e-commerce company Priceline.com received a much-needed $50-million cash infusion today from two of the wealthiest companies in Hong Kong: Hutchison Whampoa Limited and Cheung Kong Holdings Ltd.
Hutchison -- an international conglomerate whose holdings include telecommunication properties, shipping assets and resort hotels -- already has joined with Priceline.com in an alliance to bring the latter's business concept to 2.6 billion consumers in Asia. Cheung Kong, the largest real estate holder in Hong Kong, is owned by Lee Ka Seng, the richest man in Hong Kong who also has strong ties with the Chinese government in Beijing.
The transaction also represents a major bailout for Priceline.com founder Jay S. Walker. Hutchison and Cheung Kong have agreed to purchase an aggregate of 11.3 million shares from Walker for an aggregate price of approximately $24 million.
After the bell, Priceline.com reported a pro forma net loss for the fourth quarter 2000 of $25 million, or 15 cents per share, before restructuring and special charges. That compares to a fourth quarter 1999 pro forma net loss of $10.0 million, or 6 cents per share.
Analysts on average were forecasting a loss of 7 cents a share, compared with a loss of 6 cents in the same period a year earlier.
However, Norwalk, CT-based Priceline said in a statement accompanying its earnings report that as a result of its restructuring efforts, it actually "expects a pro forma operating profit by the second quarter of this year."
To date, Priceline has never made any money.
Priceline stock
Hutchison and Cheung Kong said they purchased about 24 million shares of Priceline
common stock at $2.10 per share, a price determined based on the market price
of the stock during the negotiation period. Hutchison also will receive a
seat on Priceline.com's board of directors.
"We know priceline.com well from our venture in Asia, and are excited by its
long-term growth prospects," said Hutchison Group Managing Director Canning
Fok. "We are impressed with the proven strength of priceline.com's business
model, and the tremendous brand recognition that it has built since its
inception only three years ago..."
Priceline in its earnings report said revenue in the fourth quarter 2000 was
$228.2 million, an increase of 34.8 percent over revenue of $169.2 million in
the same period a year earlier.
Full-year 2000 revenue reached $1.24 billion, compared to $482.4 million
reported in 1999.
During the fourth quarter, Priceline.com said it recognized a $66.8 million
charge -- $37.3 million of which was non-cash -- for restructuring and
special items in connection with the company's turnaround plan.
Priceline.com President and CEO Daniel H. Schulman said that the fourth
quarter, "...in addition to being our seasonally weakest quarter ... was
adversely affected by the closing of WebHouse Club, negative news stories
about customer satisfaction and the difficulties of other e-commerce
businesses."
"Priceline.com's management never doubted the viability and promise of our
business," he said. "We committed to executing a six-point plan that would
motivate and retain our employees, strategically refocus our resources on our
core products, with a particular emphasis on travel, strengthen our product
offerings and customer service, strengthen our international relationships,
manage our business toward profitability, and strengthen our balance sheet.
Over the past months, priceline.com has executed on its plan and has made
significant strides in each of these areas."
Hutchison also reaffirmed its commitment to Priceline.com's business model by
increasing its interest in Hutchison-Priceline Limited, the companies' closed Thursday at $3, up almost 44 cents. Its
52-week high is more than $104 per share.