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Why Priceline Bought OpenTable -- and What It Means for Yelp, Groupon, GrubHub

June 14, 2014

By Jessica Beeli, Equities.com

priceline, opentable, groupon, yelp

OpenTable (OPEN) surged nearly 50 percent Friday, closing at $104.48 after hotel booking giant Priceline (PCLN) announced it will acquire the restaurant reservation website for $2.6 billion. OpenTable's closing price is above the acquisition price of $103 per share for the all-cash deal.

Priceline itself saw shares rise slightly in early trading only close down nearly 3 percent on the day to $1,189.30. The news also helped to boost shares of OpenTable competitors in the online dining service space.

OpenTable Will Add Dining to Priceline's Repertoire

Priceline averages more than a million guests staying in accommodations booked through their sites every night and generated sales of over $6.8 billion last year alone. The company also maintains relationships with 480,000 accommodation locations in over 200 countries. However, Priceline is continuing to look for ways to maintain growth, namely through acquisitions.

"OpenTable is a great match for The Priceline Group," said Darren Huston, CEO of Priceline. "They provide us with a natural extension into restaurant marketing services and a wonderful and highly-valued booking experience for our global customers."

Priceline has continued to grow by adding multiple acquisitions over the years. The company's brand sites include priceline.com, agoda.com and rentalcars.com, with recent acquisitions including kayak.com and booking.com. The acquisition strategy has focused on expanded Priceline's focus on travel, that is, until the OpenTable deal.

The acquisition of OpenTable will add dining to Priceline's product offerings to customers, as well as help Priceline grow its mobile presence, continue to build its brand and take the lead in offering services beyond just transportation and lodging.

"This will be a one-stop solution to the customers, " noted Brian Sozzi of Belus Capital Advisors. He added that Priceline is on its way to becoming similar to Amazon (AMZN).

OpenTable has connections with over individual 31,000 restaurants and a customer base of 15 million. But the company is currently only available in 18 countries besides the United States. Priceline plans on extending the reach of OpenTable, both onto mobile devices and to more global markets. In the last fiscal year, 80 percent of OpenTable's revenue came from the United States, while 80 percent of Priceline's revenue was acquired abroad.

OpenTable Deal Sparks Rise in Similar Stocks

This deal also resulted in an increase in the shares of other similar online companies. Coupon provider Groupon (GRPN) rose nearly 4 percent to close at $6.24, while food delivery service GrubHub ($GRUB) gained around 7 percent to $36.00. Review site Yelp (YELP) was arguably the largest indirect beneficiary, rising nearly 14 percent to close at $74.92.

Citi analyst Mark May noted, "We believe this transaction highlights the value of online marketplace models (especially those with a bookings and/or payment connection with buyers and sellers) and note that the other companies in our universe with similar traits are GrubHub and Yelp."

Priceline's acquisition plans to let OpenTable to continue to run nearly autonomously under current CEO Matthew Roberts, similarly to both booking.com and kayak.com. The merger is expected to close within the third quarter of this year.

Copyright 2014.Equities.com. All rights reserved.

Original headline: Why Priceline Bought OpenTable, and What That Means for Yelp, Groupon and GrubHub



Source: Equities.com


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