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Expedia, the online travel agency, is joining the rush of companies increasing their debt levels to boost share price with a plan to buy back $3.5bn of its shares, or 42 per cent of the company.
The buy-back comes after a recent report that Barry Diller, chairman of Expedia, was working on a $30-a-share buy-out to take the company private. Tuesday’s move is the latest effort by Mr Diller to boost the share performance of Expedia, which was spun out of his internet group IAC in 2005.
”With this action, we couldn’t be clearer that the management and the board of this company are confident in the value of Expedia and in its long-term future,” said Mr Diller, who previously ran Paramount Pictures and News Corp’s Fox television network.
Expedia indicated on Tuesday that it wanted to buy nearly 117m shares in a Dutch auction at between $27.50 and $30, valuing the company at between $8.34bn and $9.09bn. Such an auction means shareholders can decide how many shares to sell. The company’s share price rose more than 15 per cent on Tuesday to $29.41.
The stock repurchase makes up 42 per cent of common stock and 38 per cent of the total number of shares of common stock and Class B common stock. The offer is expected to start from the week of 25 June and to expire during the week of August 6.
Expedia’s directors and executives and Liberty Media, which owns 22 per cent of the company, will not be tendering any shares in the buy-back. Liberty, controlled by John Malone, has often called for companies it invests in to increase their debt levels in other to boost shareholder returns.
Expedia has struggled amid growing competition from fellow online travel agents, as well as slowing growth in online travel sales in a maturing market. Although it is the largest online travel agent in the world it has been steadily losing market share.
Expedia is one of four top online travel agents.
Its major competitors are Travelocity, Orbitz and Priceline.com. Travelocity is heading private, while Orbitz is planning a return to the stock markets about a year after being bought by Blackstone, the private equity firm, as part of its $4.3bn acquisition of Travelport.