Barry Diller, eager to expand his television and Internet empire into the travel business, agreed Monday to pay about $1.5-billion for controlling interest in Expedia Inc., the No. 2 Internet travel agency.
The media mogul also unveiled plans to launch a new cable travel channel called USA Travel Channel that will originate from his Home Shopping Network studios in St. Petersburg.
Diller's USA Networks also paid an undisclosed sum for National Leisure Group, a Woburn, Mass.,-based firm that sold about $40-million in cruises and packaged tours in 2000.
"Travel is a huge category that is the perfect growth engine for us," said Diller, who estimates his expanding electronic commerce conglomerate will book $4-billion in travel in 2001. That's about 16 percent of all travel products sold online. "Just as our Home Shopping Network sells products of all kinds, our USA Travel Channel will sell travel and travel products of all kinds."
Microsoft Corp. founded Expedia in 1996, then took it public three years later. Terms of the stock deal give Microsoft and other Expedia shareholders several choices on how to tender their shares. All are valued at between $35 to $40 a share, depending on how Wall Street prices both stocks when the deal closes later this year.
The purchase price is still considered a premium, considering Expedia's shares hit bottom at $7.75 a share in the wake of the dot.com bust last October. The shares hit a 52-week high of $49.15 a share Monday before closing at $44.95, down $3.76 USA Networks shares closed at $26.52, up $1.26.
One big challenge: building Expedia into a moneymaking venture after years of losses. After losing $118-million on revenues of $134.9-million in fiscal 2000, Expedia expects to show its first operating profit in the fiscal year ended June 30. But it still expects to report an overall loss of $5.5-million to $7.5-million, or 11 to 15 cents a share, for the fiscal year.
Investors are wondering "if there was something wrong if Microsoft is selling," said Bob Zuccaro, portfolio manager with the Grand prix Fund, which owns Expedia shares.
Diller's company already owns TicketMaster, the entertainment and sporting event ticket distributor, and Hotel Reservations Network, a Dallas-based firm that sells hotel rooms at discounted prices. Diller predicts his combined ventures will become the leading online travel company pulling ahead of current leader Travelocity.
As part of the deals, USA Networks also gets new call centers to handle travel customers at Expedia's 600-employee headquarters in Bellevue, Wash., along with three other locations in Massachusetts, Virginia and Arizona.
"We are truly becoming the real deal in the convergence of broadband video, the Internet, entertainment and commerce," said Diller, USA Networks' chairman and chief executive officer.
Diller's new cable travel program will debut in August, initially as an hour or two of infomercials promoting vacation packages. The infomercials will appear on America's Store, one of HSN's three shopping channels, available to 13.6-million households. Initially, the new program isn't likely to create many new jobs in St. Petersburg.
Within two years, Diller plans to expand the programming into a travel channel that airs around the clock and possibly in other countries. By then Diller hopes to have built distribution to 20-million homes, about one-sixth of the coverage of HSN's primary shopping channel.
Diller wants to create a new rival to the Travel Channel, a unit of Discovery Communications, that airs travel documentaries and commercials for travel companies. Diller will showcase specific travel deals and offer to book them on the spot over the phone or online.
_ Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.