Expedia (NASDAQ:EXPE) was a lively stock on Wednesday, following the publication of a report that the company might be on the cusp of divesting a substantial stake in itself to a pair of well-known private equity firms.
The article, published in The Wall Street Journal Tuesday night, cited "people familiar with the matter" as saying Expedia was in advanced talks with Silver Lake Partners and Apollo Global Management (NYSE:APO) regarding the divestment.
The purchase price is purported to be roughly $1 billion, although it was not immediately clear how large the stake might be. At current market prices, $1 billion would buy nearly 16.3 million shares of the online travel agency (OTA), which represents 12% of total outstanding shares. It is common, however, for buyers in such situations to pay a premium to the existing share price.
The Journal wrote that Expedia "is expected to hand board representation to the investors as part of the deal." If the transaction is in fact agreed upon, it could be formally announced at some point this week.
Neither Expedia, Silver Lake, nor Apollo has yet commented on the article.
As a leading OTA comprising a suite of well-recognized travel brands (such as Travelocity, Orbitz, and Hotels.com) that cover every conceivable aspect of the voyaging experience, Expedia has suffered from the deleterious economic effects of the SARS-CoV-2 coronavirus outbreak. Bookings are down sharply as would-be travelers comply with "stay at home" mandates and airplanes remain on the runway.
Investors are obviously looking forward to the private equity firms paying a premium for the OTA. Expedia shares easily outpaced the gains of the wider equity market and its top stocks on Wednesday, zooming ahead by 7.3%. Apollo's shares inched up by 1.8%. Silver Lake is not publicly traded.