May 22, 2015 / 11:15 AM / 4 years ago

Expedia sells eLong stake to Ctrip, others for $671 million

(Reuters) - Expedia Inc (EXPE.O) said it sold its entire stake in online travel company eLong Inc LONG.O to rival International Ltd (CTRP.O) and others for about $671 million, after struggling with mounting losses at the Chinese company.

Shares of Expedia and Ctrip touched record highs in early trading on Friday. Ctrip’s stock gained 13 percent to $81.20, while Expedia’s rose 9 percent to $115.

Elong’s U.S.-listed shares rose as much as 32 percent to a four-year high of $27.

Expedia got a 30 percent stake in eLong following its 2005 spinoff from IAC/InterActiveCorp IACI.O, a media and internet company that owns brands such as and

Expedia then raised its stake in eLong to 62.4 percent in 2011.

However, rising operating losses at eLong due to heavy spending on staffing, marketing and discounts to lure travelers

in the competitive Chinese market hurt Expedia’s profit.

“We view this sale as logical given the continued losses at eLong and its weakening position in the highly competitive Chinese domestic market, where Expedia has less expertise,” RBC Capital Markets analyst Mark Mahaney wrote in a note.

ELong’s operating losses jumped to $40.1 million in the first ended March from $7.9 million, a year earlier.

Also, Expedia has been acquiring companies to widen its customer base.

The company invested $270 million in Latin American online travel company Inc in March for a under 20 percent stake.

In January, it purchased Travelocity for $280 million and in February announced plans to acquire Orbitz Worldwide Inc OWW.N for more than $1.3 billion.

Separately, Ctrip, one of China’s largest travel sites, said it had bought a 37.6 percent stake in eLong for about $400 million.

Expedia said it had agreed to cooperate with Ctrip on “certain travel product offerings for specified geographic markets” as part of the deal.

Keystone Lodging Holdings Ltd, Plateno Group Ltd and Luxuriant Holdings Ltd were the other Chinese companies that bought the eLong stake.

Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila

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