On 12 December the Financial Times reported that Liberty Interactive (NASDAQ:LINTA), a company which owns interests in subsidiaries primarily engaged in on-line commerce and video industries, has taken a controlling stake in TripAdvisor (NASDAQ:TRIP), the online travel group.
Liberty’s holdings now amount to 18 million shares of common stock and almost 12.8 million shares of Class B stock, representing 22 percent of the total stock and 57 percent of the total votes of all classes of the company’s equity. The digital business holding company acquired the 4.8 million shares of extra stock in TripAdvisor from media mogul Barry Diller and the Diller-von Furstenberg Family Foundation for $62.50 a share or about $300 million (£186 million), a 63 percent premium over Monday’s closing price.
Mr Diller has resigned as board chairman and senior executive of TripAdvisor but will continue serving as a director according to the company’s statement. "My only reason for resigning as chairman and disposing of my interests is that I have more obligations than time," Mr Diller said in a statement. He controlled the majority of voting rights through shares of his own and those granted in proxy by Liberty. The agreement between Mr Diller and John Malone’s Liberty Interactive meant that if Diller left TripAdvisor, the proxy would terminate and Liberty will assume control of the voting power of TripAdvisor’s stock.
Shares in TripAdvisor surged by 6.56 percent to $40.91 in Monday’s trading session and an additional 1.08 percent in afterhours trading. The stock has appreciated by 62.28 percent since the beginning of the year. Liberty Interactive shares dropped by 0.99 percent to $18.95.
Based in Englewood, Colo, Liberty Interactive operates and owns interests in a wide range of digital commerce businesses, including QVC, which are currently attributed to two tracking stock groups – Liberty Interactive Group and Liberty Ventures Group.
TripAdvisor was founded in 2000 to help travellers around the world “plan the perfect trip” and now is most popular due to its often caustic consumer reviews. The company’s websites rank as the world’s top travel and information destination with 64 million visitors in October. Annual revenues for the firm were $637.1 million (£395.4 million) in 2011 with net income of $177.7 million (£110.3 million). “Ever since we acquired TripAdvisor in 2004, it has been one of the smoothest and most trouble-free growth stories I’ve ever known,” said Mr Diller.
Forbes reported yesterday that under a tax increment financing (TIF) plan, TripAdvisor will built a new 230,000 sq ft campus at the New England Business Centre with the possibility of building a second 200,000 sq ft building. TripAdvisor also intends to relocate 450 full-time jobs to Needham and create 250 new jobs under the TIF agreement.
According to Trefis.com TripAdvisor’s profit margins are likely to come under pressure due to a decline in the per-click commission fee paid by Expedia – TripAdvisor’s most significant advertising customer in terms of revenue. The company’s general expenses, including costs related to services such as accounting, tax, legal, and corporate development associated with being a publicly traded company, have risen considerably. These expenses are expected to come down at some point. In the second quarter TripAdvisor registered a marginal decline in profits however net income in the third quarter grew at a robust 9 percent year-on-year.