USAI Buys Remainder of Expedia Shares

Barry Diller’s e-commerce conglomerate USA Interactive , following through on an effort that began more than a year ago, is acquiring all of the outstanding stock of travel site Expedia that it doesn’t already own in a $3.3 billion deal.

At the same time, Diller said he is resigning as CEO of Vivendi Universal Entertainment.

USA Interactive, already the majority owner of Expedia with about 54 percent of its stock, said the deal is a stock-for-stock transaction that is generally tax-free to Expedia shareholders.
Expedia’s board okayed the deal following the unanimous approval of an independent special committee.

Expedia shareholders would receive 1.93875 shares of USA common stock for each share of Expedia stock that they own, which represents approximately a 30% premium, based on the closing price of USA stock and Expedia stock yesterday.

USA closed Tuesday at $26.49. It was down about $2 a share today following the announcement. Expedia closed Tuesday at $38.90 and shot up about $8 in early afternoon trading.

The transaction allows USA to further simplify its corporate structure, the company said. USA also said that it believes that it will meet its current 2003 budgeted adjusted EPS of 75 cents per share.

“The timing in relation to world events is an accident — as often happens with transactions, they take the time they take to reach conclusion,” Diller said. ” our decision to acquire the balance of Expedia does dramatically underscore our great belief in the robust growth and long term value of online travel. Travel may be affected by this or that event, for a day or a month or whatever, but if there is life then there is travel – we bet on the latter.”

As for departing his post at Vivendi, Diller said that “my executive role was never intended to be permanent. Now that Vivendi Universal has begun a formal process in reviewing options for its entertainment assets, it is appropriate to step aside from any direct management responsibility.”

USA last year sold off its cable and movie studio operations to French media giant Vivendi Universal, changed its name to USA Interactive and went shopping for e-commerce roll-ups.

USA’s original buyout bid was part of a massive plan to shore up USA’s ownership in three of its fast-growing travel and entertainment subsidiaries and create an end-to-end e-commerce powerhouse. That bid included offers for Ticketmaster, Hotels.com and Expedia. The Ticketmaster deal was consumated last October.

USAI backed off on the Expedia takeover effort after the travel site put up some objections, but it seems clear that the economics make more sense at present.