Dec 26 - Standard & Poor's Ratings Services said today that Bellevue,
Wash.-based online travel agency Expedia Inc.'s definitive agreement to
acquire a 61.6% interest in trivago, a hotel-focused metasearch company
headquartered in Dusseldorf, Germany, for EUR477 million (about $632 million),
including EUR434 million in cash and EUR43 million in Expedia common stock. We
expect the transaction to close in the first half of 2013 pending approval from
relevant competition authorities. trivago is profitable and growing very
quickly. We expect it to generate EUR100 million in revenues in 2012.
Expedia appears to view the transaction as an investment in a high-growth
company that participates in its value chain, as cost and revenue synergy
opportunities appear somewhat limited. Post closing, trivago's existing
management will continue to operate independently of Expedia. Expedia has not
announced how it plans to fund the cash portion of the transaction. The
company did have $2.3 billion of cash, cash equivalents, and short-term
investments as of Sept. 30, 2012. However, conservatively assuming that
Expedia funded the cash portion with debt either through availability under
its revolving credit facility or new debt issuance, this would push the
company's debt leverage very close to our target of 2.5x for the 'BBB-'
rating. Presently, we believe that debt leverage is still unlikely to exceed
2.5x on a sustained basis. However, again assuming the transaction is funded
with incremental debt, the transaction has the potential to reduce Expedia's
ability to deal with an unexpected slowdown in travel booking activity while
maintaining debt leverage below 2.5x. Actual debt leverage as of Sept. 30,
2012 was 1.8x.