Wotif admits Expedia deal the best route

US-based online travel giant Expedia has swooped on Wotif.com with a $703 million offer to buy the company.

Philanthropist founder Graeme Wood owns 20 per cent of Wotif and unanimously supported the proposal.

US-BASED online travel giant Expedia has swooped on Wotif.com with a $703 million offer to buy the company after an annus horribilis in which the one-time dotcom darling Wotif suffered massive value destruction at the hands of increased competition and technology cost blowouts.

The proposed offer will see Expedia acquire all outstanding stock in Wotif for $3.30 a share, consisting of a $3.06 base offer plus a 24c special dividend.

If the offer passes approval, it will make the Wotif buyout one of the biggest acquisitions of any Australian tech company to date.

The deal comes after three months of due diligence and exploration of other options to ­realise shareholder value in the company.

“This was a long, thoughtful, deliberate process and the board looked at all available options,” Wotif chief executive Scott Blume told The Australian.

“We looked at acquisitions, we looked at joint ventures, we looked at share buybacks and indeed we looked at standing alone.

“We looked at a whole range of options with Goldman Sachs but in the end we felt this was the best way to maximise shareholder value.”

The company’s directors — including its philanthropist founder Graeme Wood, who owns 20 per cent of Wotif — have unanimously supported the proposal.

The site’s other co-founder, Andrew Brice, has also declared that unless a better offer comes in, he will vote his 15.5 per cent of the shares in favour of the deal.

At $3.30 a share, the offer ­represents a 31 per cent premium to Wotif’s weighted average price for the past five days before the offer. That premium was too good to ignore yesterday and investors jumped on the stock to send it soaring by 25 per cent to $3.29.

The buyout comes at a critical time for Wotif, which has been punished on the market in the past year for missing profit forecasts as key technology projects were hit by cost blowouts and as global competitors sneaked in to snatch away valuable market share. The combination of those events saw shares in Wotif plummet 46 per cent over the year to June 30, relegating the company as one of the worst 10 performers on the ASX in 2013-14.

Shareholders who have held on to stock since it hit all-time highs of $7.69 in April 2010 have seen the market cap of the one-time dotcom favourite collapse from $1.63 billion to the $700m that Expedia now values it at.

For major shareholders like Mr Wood, the dramatic fall of Wotif’s share-price high is the difference for his 20 per cent holding being worth $322m versus the $138m he stands to earn at the $3.30 buyout price.

Mr Blume was circumspect yesterday about that value deterioration. He said the offer would remove the uncertainty that has plagued the stock over the past 18 months. The company remained a strong presence and a powerful brand in the online travel world, but the decision to sell Wotif was a “crossroads” moment for the company.

“We could have stood and fought. We could have invested more in technology and marketing but that also brings uncertainty and risks and that’s what we had to weigh up,” Mr Blume said.

“The reality is that our industry is consolidating. We either need to sell into that consolidation now while we can and I think that’s been a good and courageous decision from the board at the right time to maximise shareholder value.”

Mr Blume was also hopeful that Wotif’s new American owners would continue to invest in the homegrown business and expand its offerings in the future.

“We’ve aligned ourselves with one of the big gorillas in the room globally in the internet e-commerce space,” he said.