Online travel company, Priceline Group, has stated that it plans to buy restaurant booking service, OpenTable, for $2.6 billion cash. Priceline has offered $103 per share of OpenTable which is a 46% premium at its current price. Here are some quotes from WSJ:
"The kind of work that we do day-to-day is very similar," Priceline Chief Executive Darren Huston said in an interview. "It's just a different marketplace."
Priceline executives aim to use their global reach to expand OpenTable business which relied on the U.S. for 80% of revenues last year. Priceline derives about 80% of its revenues from abroad.
Priceline plans to let OpenTable run nearly autonomously under CEO Matthew Roberts, the same strategy it used to fold in Booking.com and Kayak. The latter site still runs out of a Norwalk, Conn., office building two miles away from its parent company.
Is this a smart move for Priceline to buy OpenTable at such a premium, given that they deal with totally different markets?
At that kind of a P/E ratio, I'm beyond a bit leery.
this touches on the right answer, which is: it doesn't really matter what the premium is.
Damn, at my internship 2 years ago I told my PM he should invest in OpenTable. It was at like $28 at the time, and I made a 20 page research report explaining why. I obviously had no idea what I was talking about, but would've been sweet if he listened to me.
You should reach out to him...rub it in :)
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