Expedia: Just Say No

Online travel operation Expedia said it very much likes its
prospects as a stand-alone company, despite a putative offer from majority
shareholder USA Interactive to acquire all the rest of
the outstanding shares.

Expedia named a special director’s committee last month
to examine an offer from
Barry Diller’s USA Interactive
to acquire all of the outstanding shares
at a 7.5 percent premium. USA acquired a
majority stake
in February.

USAI subsequently put the brakes
on the deal
, although Diller said the plan was economically sound. “The
idea is that USA wants to simplify its capital structure,” he said at the

Expedia’s special committee was formed immediately after the offer, to
promote the interests of the company and the shareholders of Expedia other
than USAI. The deal offered Expedia public shareholders 2.6969 USA shares for
each of theirs, valuing Expedia at $76.86. The stock today was trading in the
$57 range.

Nevertheless, the committee said it believes that Expedia’s stand-alone
prospects continue to be excellent.

“This management team has an outstanding track record of success and has
shown its ability to simultaneously build the business at industry-leading
growth rates, operate at high levels of profitability and gain market share
from key competitors,” said Special Committee Chairman Greg Maffei. “The …
committee is highly confident in both the near-term and long-term prospects
for Expedia as a stand-alone company.”

“For these reasons, we believe that Expedia’s stock price significantly
undervalues the long-term prospects of Expedia,” he said. “Rather than
trading at levels reflecting Expedia’s potential — as we believe should be
the case — it appears that Expedia’s stock price has inappropriately become
linked to USAI’s stock price based on USAI’s statements.”

USAI today was trading in the $22 range.

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