OpenTable Purchased by Priceline for $2.6 Billion


OpenTable just opened the door to Priceline by accepting their $2.6 billion purchase offer last Friday. The sale went through after a unanimous “yes” vote from both company’s boards of directors. OpenTable, a San Francisco-based company, offers a new niche of service for Priceline’s existing customer base. As the CEO and President of Priceline, Darren Huston, points out, “Diners travel and travelers dine out.” The CEO further asserts that Priceline’s lead of Corporate Development, Glenn Vogel, “has a proven track record of smart acquisitions.”

Since 2004, Priceline has been purchasing travel-based businesses with proven track records in their niche markets. The first was Active Hotels in the European travel market space for 90 million pounds. Priceline acquired in Amsterdam the following year in 2005. Singapore-based Agoda came next in late 2007 adding 380 thousand properties throughout the world to Priceline’s offerings. Finally, Priceline acquired TravelJigsaw, now known as, in 2010 and Kayak in late 2012. Priceline’s CEO at the time, Jeffery Boyd, felt “the strategic addition of hotels and rental cars allowed Priceline to be more competitive against the larger online travel agencies like Travelocity, Expedia and Orbitz.” Current CEO, Huston, believes the OpenTable and Priceline “will be able to cross-promote each other’s brands.” The $2.6 billion purchase price indicates that his company’s board of directors supports Huston’s claim that “Priceline has been looking at OpenTable as an acquisition target for several years.”

Priceline offered to pay OpenTable $103 per share in a “cash up front” deal, which was a large increase over OpenTable’s closing stock price the day before the purchase of just over $70. While news of the sale pushed OpenTable’s stock up almost 47 percent on Friday, Priceline’s stock price fell more than $22 to $1,203 per share. Priceline’s sales last year were $6.8 billion. OpenTable’s sales in 2013 were $190 million, up 18 percent from the prior year.

Priceline’s global presence has the ability to add numerous growth markets for OpenTable and Huston says the first step in their plan “is to expand Open Table internationally.” Currently, OpenTable serves over 15 million customers each month, making reservations with 31 thousand restaurants. When all the entities under Priceline’s corporate umbrella are included, the company averages at least a million guest stays every night.

OpenTable, founded in the late 1990s, makes its revenue by charging participating restaurants a booking fee. Currently OpenTable requires that these restaurants install a piece of hardware to use their service. They are developing a cloud-based system that would terminate the need for the hardware. OpenTable has a plan in development to connect with their users via a phone app that allows customers to see exactly what their total bill will be and pay it via their mobile phones without the need to interface with any wait staff. Both companies have stated plans to use mobile technology to enhance the customer experience for their clients.

OpenTable will keep its San Francisco headquarters and will continue under its existing management team. The $2.6 billion purchase will be completed by the third quarter of this year when OpenTable officially joins the The Priceline Group.

By Jenny Hansen

The Motley Fool
Mercury News

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