Priceline.com to grow travel empire with $1.8-billion Kayak offer

SAN FRANCISCO -- Looking to expand its travel empire in a sluggish economy, Priceline.com plans to buy its younger, fleet-footed competitor Kayak Software in a $1.8-billion deal.

Priceline, which was welped during the dot-com boom but has grown into the world’s most valuable online travel agency, said Thursday it has offered to buy Kayak for $40 a share. That’s a 29% premium on Thursday’s closing price of $31.04.

The move was seen as a way to grow its business at a time when it has been tougher to land new customers and it has been fighting off new rivals.

Kayak is a break-out company from the latest Internet boom and raised $91 million in an initial public offering in July. It has a slew of deep-pocketed competitors, including Google Inc. as well as up-and-comers such as Hipmunk.

The boards of each company have signed off on the deal, but it still must be approved by shareholders and regulators. It’s expected to close in the first quarter of 2013.

Priceline said Thursday it has offered $500 million in cash and $1.3 billion in stock. It also said that Kayak would continue to operate independently under the Priceline umbrella. Kayak helps travelers compare flights, hotels and rental cars on hundreds of travel websites.

The announcement was made after the markets closed. Priceline stock fell more than 2% in after-hours trading.

But travelers won’t be bidding bon voyage to Kayak. Kayak Chief Executive Steve Hafner said the acquisition would help accelerate his company’s growth.

Kayak’s stock has risen since its IPO. The company, which was founded in 2004 and has influential backers including well-known venture capital firm Sequoia Capital, took years to go public. It originally filed in 2010.

Hafner and the company’s chief technology officer Paul English held a combined 16% voting power as of July.

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