Online travel Web site Orbitz mulling IPO - sources

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

 



By Jeffrey Goldfarb

NEW YORK, May 13 (Reuters) - Online travel Web site Orbitz is considering an
initial public offering to take advantage of investor zest for travel
companies and raise cash to further gain on rivals, according to people
familiar with the plans.

A public float could be part of the company's strategy to show the
government and consumers that the online ticket seller is not in the back
pocket of its airline sponsors, the sources said. New funds also would help
Orbitz beef up its ad spending, make acquisitions in the rapidly
consolidating sector and help keep top management with stock option
incentives, they added.

Orbitz was launched last June by five major airlines over consumer and
competitor objections that the site would undermine other online travel
vendors -- such as Expedia Inc. (EXPE) and Travelocity -- by hoarding
cut-rate fares and imposing fees on other carriers for offerings through
Orbitz.


U.S. regulators are monitoring the Chicago-based firm for signs of
anti-competitive behavior -- something that may scuttle the IPO plans
altogether, according to analysts.

If the public offering -- tentatively slated for the third quarter -- does
go through, it likely would draw more eager investors to the hot travel
sector.

Discount airline JetBlue Airways Corp. (JBLU) wowed investors with its IPO a
month ago. Its shares, priced at $27, surged to almost $43 on their first
day of trading.

Orbitz has hired at least three investment banks to handle the IPO, with
Goldman Sachs Group Inc. (GS) as the lead, sources said. A Goldman Sachs
spokeswoman declined to comment.

"If or when we decide to issue stock, we would alert the public through the
customary means," an Orbitz spokeswoman said.

An Orbitz IPO makes sense given current valuations, said Erica Moffett, an
online travel analyst for CIBC World Markets Corp. "That's clearly a
motivating factor -- to take advantage of the appetite for online travel
companies," she said.

Travel has rebounded strongly since the Sept. 11 attacks on the United
States while online offerings have been one of the few surviving bright
spots from the online flameout.

Consumers spent about $24 billion to buy travel services online in 2001,
analysts estimate, or about 15 percent of all travel spending. That signals
that there is more travel business to be gained online travel sites,
analysts said.

Sources said Orbitz likely would offer about one-quarter of the company to
the public. Expedia, by comparison, has a market capitalization of about $4
billion.

Although less than a year old, Orbitz -- a venture formed by AMR Corp.'s
American Airlines (AMR), Continental Airlines Inc. (CAL), Delta Air Lines
Inc. (DAL), UAL Corp.'s United Airlines (UAL) and Northwest Airlines Corp.
(NWAC) -- has rocketed to the No. 3 most visited travel site.

Expedia Inc. a majority stake of which was recently acquired by USA Networks
Inc. (USAI), and Travelocity.com, which last month was bought out in full by
majority shareholder Sabre Holdings Corp. (TSG), are first and second.

"Orbitz has become a major player very quickly," said Steve Weinstein, an
analyst with Pacific Crest Securities.

Cendant Corp. (CD) also has taken part in the rash of travel mergers,
acquiring services backbone Galileo International, online site
CheapTickets.com and timeshare business Trendwest Resorts Inc. over the past
year.

Orbitz could use the money from an IPO to buy travel-related businesses to
expand its offerings beyond airline tickets, analysts said.

Although Orbitz has attracted consumers, the U.S. government is keeping its
eye on the venture, a pledge it made when the site launched. The U.S.
Department of Transportation is expected to submit findings to Congress by
July. The U.S. Department of Justice also is conducting a review of its own.

Orbitz spokeswoman Carol Jouzaitis said the company is eager for the DOJ to
wrap up its two-year review. She added that the agency "has not expressed
any concern or issue with us" and that Orbitz remained confident that U.S.
regulators would clear the company of any competition issues.

"We think the regulatory issues are an overhang that need to be addressed,"
CIBC's Moffett said. "We agree that an IPO process would clarify the issues
and speed them up, but at this point, it's in the hands of the government."
(additional reporting by John Crawley in Washington)


©2002 Reuters Limited.

[Index of Archives]         [NTSB]     [NASA KSC]     [Yosemite]     [Steve's Art]     [Deep Creek Hot Springs]     [NTSB]     [STB]     [Share Photos]     [Yosemite Campsites]