InterActiveCorp acquires Hotwire.com

FRAMINGHAM (09/23/2003) - Online vendor IAC/InterActiveCorp continues on a buying spree, announcing Monday the acquisition of travel Web site Hotwire.com after buying up a host of other sites earlier this year, including Expedia.com, Hotels.com and Ticketmaster.com. New York-based IAC is buying Hotwire.com, a discount travel Web site that first went live in late 2000, for US$665 million in cash plus the assumption of about $20 million in options and warrants.

San Francisco-based Hotwire.com will remain a separate subsidiary after the deal closes in the fourth quarter of the year.

Spokesmen for IAC and Hotwire could not be reached for comment early Tuesday.

IAC also announced the formation of a single travel division, IAC Travel, comprising the company's travel businesses, including Expedia.com, Expedia Corporate Travel, Classic Custom Vacations, Newtrade Technologies, Hotels.com, Hotwire.com, Travelnow.com and Expedia's international brands. All the businesses will maintain their individual names within the new division.

Lorraine Sileo, a travel analyst at PhoCus Wright Inc. in Sherman, Connecticut, said the Hotwire acquisition brings together the final piece that was missing from the IAC travel portfolio.

Travel customers can already book their rooms and travel directly through retail vendor Web sites, or they can get lower, negotiated prices through Web sites such as Expedia and Hotels.com, Sileo said. But by buying Hotwire, IAC now has its corporate arms wrapped around an "opaque" Web site that offers steeper travel discounts but doesn't let buyers know what hotel they have or what airline they're flying until the purchase is completed. Opaque online sales help travel suppliers sell their excess inventory, while preventing the public devaluation of hotel rooms and other travel products.

"That completes the triangle" for IAC, Sileo said. "They've been looking around for acquisitions and they've been on the acquisition trail."

The work now will be for IAC to make all of its travel holdings work together, she said. Hotels.com, Expedia and Hotwire all use different IT platforms, from extranets and faxes for Hotels.com to the Pegasus reservation system for Hotwire.com. "How it all comes together will be interesting," Sileo said.

Hotwire was founded by Texas Pacific Group and several airlines: American Airlines Inc., America West Airlines, Continental Airlines Inc., Northwest Airlines Inc., United Air Lines Inc. and US Airways Group Inc.

"There is a tremendous potential for growth online, including opaque and price-sensitive travel segments," Erik Blachford, president and chief executive officer (CEO) of IAC Travel, said in a statement. "As the fastest growing opaque travel Web site, Hotwire is a compelling addition to the IAC Travel portfolio."

IAC has been busy all year expanding its business portfolio.

In May, it acquired online lending exchange LendingTree Inc., while in April it bought Hotels.com and online personals Web site Udate.com. In March, IAC acquired Expedia, while in January it acquired online entertainment and sports ticket company Ticketmaster.com.

IAC, formerly known as USA Interactive, is led by Chairman and CEO Barry Diller.

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