Why Priceline's $2.6 Billion Buy of OpenTable May Be a Bargain
NEW YORK (TheStreet) -- Online travel services provider Priceline (PCLN) announced Friday it had agreed to buy restaurant-bookings Web site OpenTable (OPEN) for $2.6 billion in an all-cash deal. The deal is expected to be completed in the third quarter and values OpenTable at $103 a share, a 46% premium over Thursday's closing price.
OpenTable was surging 47% to $103.50 while shares of Priceline were slipping 0.7% to $1,216.95.
The acquisition comes at a time when shares of OpenTable, which books 15 million diners a month at more than 31,000 restaurants, were struggling to regain momentum. The stock suffered a steep setback from March and April's substantial tech selloff that was spurred by concerns about high valuations and another dotcom bubble.
While many momentum shares have recovered, OpenTable has yet to make a full rebound, owing to worries about its room for future growth in the face of a rising number of electronics reservations bookings services.Holders of the stock have seen shares decline more than 11% this year, following a more than 15.5% drop between the sharply swooning March and April months. But even prior to Friday's announcement, the selloff appeared to have bottomed. Shares were trying to make their way back up and the stock was at $70 a share Thursday while the company appeared poised for a round of fresh new strategic initiatives.