Capital Markets

Rumors Fly as Expedia Plans Dutch Auction Buyback

Company denies the buyback is the first step in a creeping going-private plan by Liberty Media chairman Barry Diller.
Stephen TaubJune 19, 2007

Expedia, Inc. said it will repurchase about 42 percent of its shares in a Dutch auction. The online travel company plans to pay between $27.50 and $30 per share, costing it as much as $3.5 billion. The announcement sent the company’s stock surging by more than 15 percent, to more than $29 per share.

Under a Dutch auction, shareholders submit bids to sell their shares at a price within the company’s set range. The company then sets the price based on the bid with the lowest price that would enable it to buy back all of the shares it plans to purchase.

Expedia said its directors and executive officers as well as Liberty Media Corp., which owns a 22 percent stake, do not intend to tender any shares in the tender offer.

As a result, the buyback will strengthen Liberty’s hold on the company. Liberty conducted its own dutch-auction buyback in May.

The transaction has raised questions as to whether the buyback is the first step of a creeping going-private plan by Liberty chairman Barry Diller. Diller emphasized in a press release: “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.”

On Friday, rumors were flying on Wall Street that the company was planning to go private or spin off its TripAdvisor business, although the company denied these reports.

“Expedia is not going private, we are not spinning off TripAdvisor and we are not eliminating jobs,” Audrey Lincoff, vice president for corporate communications, told the AP on Friday.

Nonetheless, the recent reports and buyback announcement have sent Expedia’s stock up nearly 25 percent since late last week, close to the top of the anticipated Dutch auction range.