Sunday, June 15, 2014
NEW YORK (AP) — Priceline has negotiated a $2.6 billion entree into the restaurant business.
The global travel booking king announced Friday it is acquiring OpenTable Inc. in a deal that would put Priceline into a new business doing for restaurant reservations much what it does for hotel bookings.
The deal should give Priceline a new way to cater to its increasingly mobile-savvy customers, while parlaying Priceline's global reach to expand OpenTable to other countries.
"Travelers are diners," Priceline Group CEO and President Darren Huston said on a conference call. "It's the same customers. There's opportunity to cross-promote brands."
In a statement, OpenTable CEO Matt Roberts cited Priceline's expertise in online marketing globally on all types of devices.
"They have an exceptional track record of customer service in dozens of languages around the world," Roberts said.
Priceline will pay $103 per share, which is a 46 percent premium to OpenTable Inc.'s Thursday closing price of $70.43.
Shares of OpenTable soared $34.05, or more than 48 percent, to close at $104.48 Friday. Priceline shares fell $36.70, or 3 percent, to $1,189.30.
Priceline, which generated sales of $6.8 billion last year, has made a series of acquisitions over the last decade, most recently last year's purchase of Kayak.com, an online travel site. The acquisitions focused on travel — until now.
During the conference call Friday, Huston noted the latest deal doesn't signal it's going on any acquisition binges. In fact, Priceline's main business is still growing well, he said. But he noted OpenTable offers an opportunity to increase the size of its market.
In an interview with The Associated Press, Huston said the company has seen OpenTable as an acquisition target for many years. But the time was right now.
OpenTable seats more than 15 million diners per month at more than 31,000 restaurants. It allows users to make free reservations at restaurants through its website and mobile apps. It makes money by charging restaurants fees for the bookings. Users can also read reviews and view menus through the website or mobile app.
OpenTable, founded in 1998, has enjoyed double-digit growth for the past several years and generated revenue of $190 million last year. That's up 18 percent from the year before and more than triple its 2008 revenue of $55.8 million. In 2010, it purchased toptable.co.uk, a similar site in the United Kingdom.
OpenTable will remain headquartered in San Francisco and will operate as an independent business led by its current management team.
Huston said Priceline's first goal is to expand OpenTable internationally. Users can already book restaurants in London, Berlin, Hong Kong and other cities, but Huston said it is seeking to add more cities. Because Priceline already has "offices in every major city in the world," doing so should be seamless, he said.
OpenTable also is working on making it easier to sign up new restaurants to its service, said Huston. The company is creating a cloud-based system instead of using the hardware it now needs restaurants to install to use OpenTable.
At Priceline, an average of more than 1 million guests stay in accommodations booked through one of its brands each night. Its brands include Booking.com, priceline.com, agoda.com, and rentalcars.com and it has relationships with more than 480,000 properties in more than 200 countries and territories worldwide.
Brian Sozzi, of Belus Capital Advisors noted that competition for OpenTable has increased from services including Grubhub.com and Ureserv.com, but OpenTable still dominates in a fragmented market.
"This will be a one-stop solution to the customers," he said. He noted that Priceline is becoming like an Amazon.com to travelers.
Huston said that the next big wave is tackling ways to use mobile technology to enhance the dining experience.
OpenTable is testing a service where the diners' phone is connected to the restaurant's payment system, he said. That means that as diners order they can see the bill increase as they order more and can pay without ever having to interact with the waiter. He said Priceline will help to expand that test around the country.
The Norwalk, Connecticut, company changed its name from Priceline.com Inc. to Priceline Group Inc. in April to better reflect the breadth of its business.
Both boards of Priceline and OpenTable unanimously approved the deal, which is targeted to close in the third quarter.
AP Business Writer Michelle Chapman contributed to this report in New York.
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