Oppenheimer Asks: Is Expedia Planning To Acquire Travelocity?

Manish Hemrajani of Oppenheimer on Friday explored the possibility of Expedia EXPE acquiring Travelocity. Hemrajani notes that on Thursday the FTC posted on its website that it has granted an Early Termination notice to Sabre SABR and Expedia on their Hart Scott Rodino (HSR) filing with the acquired entity being Travelocity. The analyst adds that barring any press releases from either company, “we can only opine on the probability that Expedia is in the process of acquiring the entire Travelocity asset.” Expedia currently has a 50 percent revenue share agreement with Sabre relating to Travelocity with Expedia having completed integration of Travelocity with its back-end systems in the first quarter and Sabre handling the sales and marketing aspect. The analyst states that if an acquisition were to happen, it will be a positive development for both firms. On the one hand, it will help Travelocity deliver its balance sheet further and takes a non-core asset out of focus. On the other hand, Expedia will gain further market share in the U.S. and four more quarters of inorganic boost to its revenue growth. Shares of Expedia are Outperform rated with a $92 price target while shares of Sabre are also Outperform rated with a $22 price target.