Though Liberty already had enough shares that gave it voting control in TripAdvisor, it didn't have the right to vote those shares due to a previous agreement with Barry Diller
Liberty Interactive Corp (NASDAQ:LINTA) announced today that it has purchased additional stakes in the Nasdaq-listed TripAdvisor Inc. (NASDAQ:TRIP), thus gaining the voting control in the world’s largest travel services firm.
Liberty Interactive Corp (NASDAQ:LINTA) acquired 4,799,848 shares of TripAdvisor Inc’s (NASDAQ:TRIP) common stock from Barry Diller and The Diller-von Furstenberg Family Foundation, at $62.50 a share, which was a 63 percent premium over TripAdvisor’s (NASDAQ:TRIP) closing price on December 10. Billionaire John Malone’s Liberty paid Mr. Diller $300 million in total. The deal values TripAdvisor Inc (NASDAQ:TRIP) at $9 billion. After the announcement, the travel services firm’s shares gained 9 percent on Tuesday.
Liberty already owned 12,799,999 shares of Class B super-voting stock in TripAdvisor Inc (NASDAQ:TRIP) that were enough to give it a voting control. But a past agreement had given Mr. Diller the rights to vote those shares. The latest deal terminated that agreement and transferred the voting rights to Liberty.
Now Liberty owns 18.15 million shares of common stock and 12.8 million shares of Class B super voting stock in TripAdvisor Inc (NASDAQ:TRIP). With this, Liberty owns 22 percent of equity and 57 percent of total votes in TripAdvisor Inc (NASDAQ:TRIP). Though Diller has resigned as a chairman, he will continue as a director of TripAdvisor.
After Diller acquired TripAdvisor Inc (NASDAQ:TRIP) in 2004, the company has grown from 23 million in revenue to a $5 billion company, operating the world’s largest travel site. Barry Diller gives full credit to CEO, Steve Kaufer and his team for the success of the company. Diller said he is resigning and selling his stake because he has more obligations than time.
Steve Kaufer, co-founder and chief executive of TripAdvisor Inc (NASDAQ:TRIP), said, “Liberty has been an important stockholder of ours and we look forward to continuing this relationship in the future.”
Liberty Interactive Corp (NASDAQ:LINTA), which is listed in Nasdaq, owns stakes in a wide range of digital commerce firms, including Celebrate Interactive, BodyBuilding.com, BackCountry.com, CommerceHub, Motosport, etc.
TripAdvisor (NASDAQ:TRIP) receives over 60 million unique monthly visitors from around the world, and it has more than 75 million reviews and opinions.
While part of the sizeable premium paid by Liberty relates to the acquisition of voting control, Morgan Stanley believes that this announcement is a positive for TripAdvisor shares. In May 2012, Liberty sold 8.45MM of TRIP shares at an average price of $40; however, by acquiring Barry Diller’s stake, Liberty gets voting control.
While Liberty has historically categorized the TripAdvisor stake as non-strategic, by regaining its votes previously controlled by Diller, the company gains flexibility and options in monetizing its TripAdvisor stake tax-efficiently long-term.
Given Liberty’s focus on its portfolio companies returning capital to shareholders, Morgan Stanley sees the potential for TripAdvisor to initiate a share buyback or dividend program in the future.
PiperJaffray holds Overweight rating for TripAdvisor because it believes that TripAdvisor is well-positioned to benefit from travel advertising spending online. The analysts at Piper Jaffray state:
We continue to see TripAdvisor as well positioned to benefit from a shift in travel advertising spend online. It remains clear that TripAdvisor is a valued traffic & bookings driver for its advertisers and given the proprietary nature of the information contained on the site, we believe it is unlikely that a competitive displacement could take place in the review/recommendations category.