Expedia Is Buying HomeAway, But Could Other Suitors Step In?

• HomeAway, Inc. AWAY confirmed on Wednesday it has received a buyout offer from Expedia, Inc. EXPE to acquire the entire company for $38.31 per share.
• The deal would consist of $10.15 in cash and 0.2065 shares of Expedia for each share of HomeAway.
• Analysts noted that other suitors could come into play.

HomeAway has agreed to be acquired by Expedia for $38.31 per share, valuing the total deal at $5.9 billion. HomeAway investors will receive $10.15 per share and 0.2065 Expedia shares for each HomeAway share owned.

The Boards of Directors of both companies have approved the transaction, which is expected to close in the first quarter of next year.

Here is a summary of what some of Wall Street's top analysts are saying about the deal.

Pacific Crest: Potential Competing Offers

Evan Wilson of Pacific Crest commented in a note that HomeAway is a "potential strategic asset" for Expedia, as well as other firms engaged in travel and lodging.

The analyst noted that the acquisition price tag implies a 20 percent premium to HomeAway's closing price on Wednesday, which could have been different if public investors knew a 6 percent consumer fee was coming in mid-2016 and could have closed the monetization gap with Airbnb which was recently valued at $25 billion.

Related Link: Why SunTrust's Bob Peck Is Downgrading HomeAway

Bottom line, Wilson stated that while he has no knowledge of another competing bid, the potential does exist for another player to present a competing offer.

Shares of HomeAway remain Overweight rated with a price target raised to $40 from a previous $36.

Deutsche Bank: ‘Home Run' Potential

Lloyd Walmsley of Deutsche Bank commented in a note that the HomeAway deal "bolsters an already attractive" multi-year bullish theme for Expedia.

Walmsley offered three reasons why he would favor an acquisition: 1) a deal offers a "compelling" opportunity to increase take rates, 2) the price tag (14x 2017 EBITDA) does not reflect the potential "wild success" of the new fee model, 3) Expedia gains "strategic insulation" from the Airbnb risk.

Walmsley added that under a bull case scenario, Expedia's acquisition could prove to be 7 percent (or $450 million) accretive to its EBITDA in 2018, ahead of the company's own $350 million estimate.

In a separate note, Walmsley suggested that the price tag on the deal undervalues the optionality at HomeAway. As such, this "leaves room" for another bidder to emerge, although the odds of that scenario occurring are estimated at 25 percent.

The analyst also pointed out that HomeAway's SEC Form SC14D9C said that the opportunity "did come up quickly" and that a more "confident" analysis of the traveler fee model, and/or potential cost synergies, could justify a higher price from a competing firm such as Priceline Group Inc PCLN.