Expedia buying Austin-based HomeAway for $3.9 billion

Updated Nov 04, 2015

HomeAway, one of Austin’s most high-profile public companies, on Wednesday said it has agreed to be acquired by online travel giant Expedia Inc. for $3.9 billion in cash and stock.

Under the deal, Expedia will exchange $10.15 in cash and 0.2065 of a share for each HomeAway share, the companies said in a release announcing the acquisition. Based on Wednesday’s closing prices for both companies’ stock, the deal would represent an 18 percent premium for HomeAway shareholders.

HomeAway, which operates the world’s leading network of online vacation rentals, saw its shares soar after the deal was announced, rising as much as 20 percent in after-hours trading. Expedia’s stock also jumped, gaining more than 2.5 percent.

The acquisition, approved by both companies’ boards, will have to pass regulatory scrutiny and still needs investor approval. The companies said they expect the transaction to close in early 2016.

While Expedia officials said they will consolidate some overlapping operations, HomeAway CEO Brian Sharples said the brand will continue to operate autonomously in Austin. The employee reaction to the deal was “very strongly positive,” he said on a conference call with analysts.

“As for Austin, I don’t think there is going to be much of a change,” Sharples said in an interview with the American-Statesman. “As a combined company we’ll probably be able to grow even faster. This is our corporate headquarters, and, if there’s anything we’ve learned over time, it’s great to have as many people running your company in the same place.”

Sharples said he would remain with the company, but his title hasn’t yet been decided.

The agreement marks the third multibillion-dollar deal for an Austin-based company announced this year, joining the $11.8 billion acquisition of Freescale Semiconductor and the recently announced $4.5 billion private equity buyout of SolarWinds Inc.

Although the HomeAway purchase means that Austin would no longer be home base for yet another well-known public company, the deal will likely result in a stronger, larger player in the travel industry, said Kirk Walden, an adjunct business professor at Texas State University and principal of Austin-based Walden Consulting.

“I love public companies and they’re one measure of a region’s success, but you can’t argue with success at $3.9 billion,” he said. “This puts HomeAway into a different realm, and being part of Expedia will make them a stronger competitor.”

Founded in 2005, HomeAway built a network of websites with more than 1 million listings in almost 200 countries. Its portfolio includes vacation rental websites HomeAway.com, VRBO.com and VacationRentals.com in the United States, as well as sites in the United Kingdom, France, Germany, Spain, Brazil, Australia, New Zealand and Asia.

The company has more than 1,900 employees worldwide, including 1,086 in Austin.

But HomeAway, which raised nearly $505 million in five funding rounds before going public in 2011, has faced increasing competition, particularly from room-sharing sites such as San Francisco-based Airbnb.

As its inventory shows up on Expedia and that company’s suite of other sites, including Travelocity and Hotels.com, HomeAway could extend its nascent push into urban markets to supplement its core vacation-rental business, Sharples and Expedia officials said.

In part to counter the rising competition in the online travel industry, HomeAway had already planned to ramp up spending on marketing efforts in the coming years. Much of the money saved on consolidating parts of the two companies’ operations will go back into those marketing campaigns, officials said.

“We’re very much in a brand game, a brand battle,” Sharples said on the conference call, “and we have another company out there that has been a poster child of the sharing economy.”

The two companies, which initially forged a partnership in 2013 that put HomeAway listings on Expedia.com, said the scale of their fully combined offerings would be hard for travelers and property suppliers to ignore.

Already one of the world’s largest travel and lodging sites, Expedia has recently added even more pieces as it works to fend off Google, Airbnb and a host of other companies jumping into the travel services and booking business.

Last month, the Bellevue, Wash.-based company closed its $1.6 billion acquisition of Orbitz Worldwide. Expedia now has more than 200 travel booking sites in more than 70 countries, according to its website. It employs more than 18,000 workers in more than 30 countries.

“This isn’t a winner-take-all business,” Sharples said on the conference call. “There’s room for a couple big winners and a handful of other players,” and this transactions cements HomeAway and Expedia as one of the big winners.