Image source: Getty.
What happened
MakeMyTrip Limited (MMYT 0.52%) stock was soaring today as the Indian travel website announced it would acquire rival Ibibo Group to create the biggest company in the country's fast-growing travel bookings market. As of 2:56 p.m. EDT, the stock was up 52%.
So what
The deal will value the combined company at $1.5 billion, north of MakeMyTrip's valuation around $1.3 billion in afternoon trading. The two companies together processed over 34 million transactions and their internet properties include MakeMyTrip, goibibo, redBus, Ryde, and Rightstay.
The deal comes at a time when MakeMyTrip's stock has been suffering. The company has missed earnings estimates seven quarters in a row, and analysts see the company headed for a $0.63-per-share loss in its upcoming earnings report.
Now what
The merger should help MakeMyTrip on its path to profitability, but the online travel agency industry can be cutthroat, as rampant consolidation showed in the U.S. market, where Priceline and Expedia have emerged as the two key players. The deal will give MakeMyTrip 20% market share in online flight bookings, but only single-digit market share in hotel and bus bookings.
Naspers and Tencent, the owners of Ibibo, will hold a 40% stake in the new company, while Ctrip.com will own another 10%. Considering the market's reaction and MakeMyTrip's series of losses, I wouldn't be surprised to see another acquisition in the company's future.
