Expedia Expands in Europe with Auto Escape Group Acquisition

Zacks

Expedia Inc. (EXPE) has agreed to acquire Auto Escape Group which is jointly owned by private equity fund Montefiore Investment and Auto Escape Group's management team.

The terms of the deal have not been disclosed and the transaction is expected to close during the third quarter of 2014 subject to various regulatory approvals.

Founded in 1999, Auto Escape Group is a European online car rental company offering car hire services via two brands: Auto Escape and Car del Mar. Auto Escape employs about 115 people and offers nearly 300 cars in 125 countries through car rental suppliers.

Upon deal closure, Auto Escape Group will become part of the CarRentals.com brand and report to Henrik Kjellberg, President of the Hotwire Group.

The acquisition will add more than 20 websites, further boosting Expedia’s corporate travel portfolio. The deal will help expand Hotwire Group’s car rental business as well as vacation packages under Expedia Inc. brands. Additionally, the deal will enhance cost-efficiency measures while facilitating Expedia’s expansion into the European car rental market.

We believe that it is important for Expedia to expand internationally, especially since the strategy has worked so well for its major competitor Priceline.com (PCLN), which owns Booking.com in Europe and Agoda.com in Asia.

Additionally, the company has been entering into strategic alliances to fight the increasing competition in the online travel industry. Last year, Expedia signed a strategic long-term marketing partnership with Travelocity to share the workload on searches, bookings and promotion.

We believe these alliances and acquisitions will help Expedia to grow in the future.

Expedia, one of the leading online travel companies in the world, reported first-quarter earnings of 1 cent, in line with the Zacks Consensus Estimate. However, revenues were $1.20 billion, up 4.2% sequentially and 18.6% year over year. While growth rates across most brands were healthy, Expedia, Trivago and Hotels.com were the strongest in the first quarter.

Expedia has a Zacks Rank #3 (Hold). Other stocks that look attractive at the current levels are Vipshop Holdings Ltd. (VIPS) and Rovi Corp. (ROVI), both sporting a Zacks Rank #1 (Strong Buy).

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