Priceline to buy OpenTable in $2.6 billion deal

NEW YORK — Priceline stepped up its acquisition spree by buying OpenTable in a deal valued at $2.6 billion, adding restaurant bookings to an online travel business already spanning flights, hotels and cars.

The all-cash offer of $103 per share for the popular Internet restaurant reservation company is 46 percent higher than OpenTable’s closing price Thursday. The deal is expected to be completed in the third quarter, the companies said Friday.

Priceline is buying a company that seats over 15 million diners per month across more than 31,000 restaurants via online bookings. As consumers increasingly use services like OpenTable on mobile devices, the deal boosts Priceline’s presence on smartphones and further connects the company to local businesses.

For OpenTable, the deal is “a good way to get demand in new markets, just a natural bigger-pocketed partner to scale the business internationally,” said Praveen Menon, analyst at Bloomberg Industries. “They’ve been largely a U.S. restaurants- type business. This is where Priceline comes in.”

In addition to expanding outside the U.S., where OpenTable generates about 81 percent of its revenue, Priceline will also benefit from OpenTable’s mobile business, Menon said.

OpenTable’s stock soared 47 percent to $103.61 at 9:35 a.m. in New York, slightly above the offer price of $103 a share. The stock had dropped 11 percent this year before Friday. Priceline, based in Norwalk, Connecticut, had gained 5.5 percent this year through Thursday.

The takeover price is 53 percent more than OpenTable’s average stock price in the prior 20 days. That’s the highest premium since 2007 for a North American Internet deal of more than $1 billion, according to data compiled by Bloomberg.

News of the deal sent Internet stocks higher, including GrubHub, Groupon and LiveDeal.

Revenue at OpenTable is forecast to climb 19 percent to $226 million this year, according to the average of analysts’ estimates compiled by Bloomberg.

OpenTable “would be a good asset for anyone trying to build out a local or mobile ecosystem,” Tom White, an analyst with Macquarie Group, said last month.

The company sold shares to the public in May 2009 at $20 each, and the stock soared 59 percent on its first day of trading.

Benchmark, a venture capital firm, was the biggest shareholder in OpenTable when it went public. Since the IPO, Benchmark has reduced its holdings from 5.3 million shares, or 24 percent of the stock outstanding.

Shareholders representing about 7 percent of the stock — primarily OpenTable board members — have already agreed to support the deal. Among them is Bill Gurley, an OpenTable board member and a general partner at Benchmark.

Benchmark’s biggest venture investments have included Uber Technologies, Zillow, Zipcar, eBay and Yelp. The firm holds a stake of about 5.4 percent in Twitter Inc., valued at about $1.2 billion, according to data compiled by Bloomberg.

Founded in 1998, OpenTable will continue to be based in San Francisco, according to the statement. The deal, which has been approved by both companies, includes a $91 million termination fee. OpenTable also agreed not to solicit other takeover offers.

Priceline has used acquisitions to spur growth and surpass Expedia in revenue. Last year’s purchase of Kayak Software, for about $1.7 billion, helped Priceline capture revenue in hotel search and the company is now making its largest purchase ever to branch out in restaurant bookings.

The OpenTable deal is the first big move for Priceline Chief Executive Officer Darren Huston, who took over in January with a challenging task: continue to fuel growth after his predecessor Jeffery Boyd, who stayed as chairman, generated a 100-fold stock surge in 11 years.

More in Herald Business Journal

Mountlake Terrace-based 1st Security Bank wasn’t traded publicly during the recession, but it has seen a steady growth since the recession. (Jim Davis / HBJ)
How stocks in local banks fared since the recession

Every bank was hit hard during the recession, but most have bounced back in a big way.

Boeing bolsters team for potential 797 with leading engineer

Terry Beezhold has been chief project engineer for the 777X program.

The FCC chairman moves to repeal ‘net neutrality’ rules

His plan would allow internet providers to control broadband speeds and favor their own services.

Tom Hoban
Are millennials warming up to life in suburbia?

They dominate the apartment market and their wants need to be accounted for, says columnist Tom Hoban.

Camano artist mixes flask, paintings for successful cocktail

Art flasks prove popular as bachelorette gifts, birthday presents and wedding favors.

Katie Garrison
New agent joins Re/Max Elite’s office in Snohomish

Re/Max Elite welcomed a new agent to its Snohomish office. Katie Garrison… Continue reading

UW Bothell Pub Talk looks at Greenhouse Gas Mystery

The Greenhouse Gas Mystery is the topic for the next UW Bothell… Continue reading

EvergreenHealth Monroe pharmacy interns travel to Ghana

Earlier this year, University of Washington School of Pharmacy students and EvergreenHealth… Continue reading

Everett Clinic Foundation gives $6,500 to nonprofit Christmas House

The Everett Clinic Foundation recently awarded a $6,500 operating grant to the… Continue reading

Most Read