Travelzoo shares surge on takeover talk

NEW YORK (Reuters) - Travelzoo Inc (TZOO.O) shares rose about 22 percent on Friday, buoyed by market chatter the online travel site may be the target of a takeover bid by Priceline.com Inc (PCLN.O).

"This is being attributed to a rumor that Priceline is interested in acquiring Travelzoo," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

Jon Najarian, co-founder of Web information site optionmonster.com in Chicago, said the share rise was "on both takeover talk and a more optimistic outlook for the sector."

"The takeover talk we're hearing is in the form of a Priceline for Travelzoo rumor that hedge funds have heard and have reacted to," he said.

He said investors are buying into the rumor because of the 45 percent gain in Priceline's share price since August.

Priceline said it does not comment on rumors. Travelzoo was not immediately available for comment.

Travelzoo has a market value of about $360 million.

The rumor also fueled option activity. Travelzoo October calls allowing investors to buy its shares at $22.50 and $25 a piece were aggressively traded early on Friday.

Travelzoo shares were up $4.23, or 21.3 percent, at $24.12 in afternoon trading on Nasdaq after hitting a high of $24.34. Priceline shares were down 21 cents at $89.64 also on Nasdaq.

(Reporting by Doris Frankel and Chris Reiter)