In a deal that would unite two of the biggest online travel agencies, Expedia announced Thursday that it is buying competitor Orbitz for about $1.3 billion in cash.
A union would bring further consolidation to the online travel-booking industry. In January, Expedia bought another competitor, Travelocity, for $280 million. When that deal was announced, Orbitz was already reported to be looking for a buyer.
The king of travel websites remains the Priceline Group, which owns such brands as Booking.com, Priceline.com, Kayak.com and Rentalcars.com, among others.
Orbitz comes with CheapTickets, ebookers, and HotelClub. Expedia already owns brands like Hotwire and Hotels.com.
Expedia said it is paying about $12 a share for Orbitz. The deal, valued at $1.6 billion including the assumption of debt, still needs shareholder and regulatory approval.
Expedia executives said during a conference call Thursday that the online travel booking business is still highly fragmented. They said they were confident the deal would pass regulatory muster despite the Travelocity purchase.
Orbitz, originally founded by major U.S. airlines but later owned by private equity companies, has been headquartered in Chicago since 2007. The company employs about 800 people there.
The deal is expected to create $75 million in savings and extra revenue per year, according to Expedia executives.
“We think that Orbitz can add to scale and add to our ability to run a more efficient machine, so to speak,” said Dara Khosrowshahi, Expedia’s president and chief executive.
While the deal reduces competition among online travel companies, Expedia executives said consumers still have many options for travel booking, including smaller travel sites and direct booking sites for airlines and hotels.
“There have been plenty of new players that are trying to get into the industry,” said Khosrowshahi.
Still, antitrust adovcates say federal regulators should scrutinize the deal closely to see if it hurts consumers.
“My first reaction is that you have two major players in the online travel spaces and it’s going to be a big concentration with this deal,” said Diana Moss, president of the American Antitrust Institute.
She noted that the deal comes after a series of airline mergers have put control of nearly 80% of domestic flights in the hands of four carriers.
“This is one more thing to pile on top of the merger pile,” Moss said.
Shares of Expedia rose $11.35, or 14.5%, to $89.57, while shares of Orbitz rose $2.10, or $21.8%, to $11.72.