Expedia selling stake to private equity as travel restrictions hit

Expedia is in advanced talks to sell a stake to private equity firms Silver Lake and Apollo Global Management.

Expedia is in advanced talks to sell a stake to private equity firms Silver Lake and Apollo Global Management after the widespread travel bans caused by the coronavirus pandemic ravaged the online-booking company’s business.

Expedia, led by Barry Diller, is expected to hand board representation to the investors as part of the deal, which could be announced this week, sources say.

The investment was likely to total around $US1bn ($1.6bn), the people said. Other details couldn’t be learned.

The talks could still fall through, and Expedia could opt to raise funds another way, including a public-debt offering, the sources cautioned.

The cash could tide the Seattle company over until travel restrictions are lifted and the economy can recover from its steep drop-off.

Expedia operates several brands including Travelocity, Orbitz and Vrbo that are used to book flights and lodging. Demand has disappeared over the past two months as much of the world’s population remains under orders to stay home to stem the spread of the new coronavirus. Airline passenger numbers have fallen by 95 per cent or more from pre-pandemic levels and many hotels are near-empty or being repurposed as healthcare facilities.

Expedia on March 13 said the impact from the virus would be larger than previously anticipated and withdrew its guidance, becoming one of the first of many to do so. The company last year generated roughly $US12bn in revenue.

Expedia in March drew down nearly all of a $US2bn credit facility. The company had more than $US4bn in long-term debt at the end of the year and more than $US3bn in cash.

Expedia’s market value has dropped to roughly $US8bn from about $US16bn at the beginning of the year.

JPMorgan Chase and Moelis were advising Expedia, people familiar with the matter said.

Expedia is without a chief executive or permanent finance chief and was already struggling to compete with the increasing sway of Alphabet’s Google search engine in travel booking. Expedia’s former CEO and CFO were ousted in December following a disagreement about the company’s strategy with Mr Diller, who is chairman, and the rest of the company’s board.

Mr Diller and vice-chairman Peter Kern have been managing the company’s day-to-day operations, as it looks for new leadership. Mr Diller, who is also chairman of media holding company IAC/InterActive, took over Expedia’s board in 2002 when IAC acquired a controlling interest. The company was spun off from IAC in 2005.

Companies of all stripes — but especially in the travel sector — have been drawing down on credit lines and looking for other ways to stockpile cash to withstand potentially months of social-distancing measures. Expedia’s peers, including Sabre and Booking Holdings, have both issued new debt in recent weeks.

Silver Lake, based in Menlo Park, California, is one of the most active technology-focused private equity firms. In recent weeks it has ploughed money into Twitter and Airbnb, the home-rental service that like Expedia has been hit hard by the stay-at-home orders.

Apollo, with more than $US331bn in assets and a penchant for distressed investing, has also been busy.

It invested $US10bn into new opportunities across private equity and credit in the month of March alone, The Wall Street Journal has reported.