Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Chinese travel specialists Ctrip Interational Ltd (ADR) (NASDAQ:CTRP) and eLong (ADR) (UNKNOWN:LONG.DL) were up more than 13% as of 10:30 a.m. Friday after Ctrip announced it had acquired a "strategic" stake in its smaller competitor.
So what: In a press release this morning, Ctrip said it acquired a 37.6% equity stake in eLong for a total purchase price of approximately $400 million. Ctrip noted it purchased those shares from "certain selling shareholders, including Expedia(NASDAQ:EXPE)."
Expedia held a 62.4% stake in eLong prior to divesting that stake to both Ctrip and other travel specialists for a total of $671 million, it announced today. For perspective, that values eLong at roughly $1.075 billion, compared to its current market capitalization of roughly $810 million.
What's more, Ctrip and Expedia have agreed to cooperate with one another to "allow their respective customers to benefit from certain travel product offerings for specified geographic markets."
Now what: Such collaboration should be a win-win-win for all three companies: for eLong, given the implied valuation and a big bet from larger players in the space, and for Ctrip and Expedia, given their collaboration to expand their respective geographic reaches. Rumors had previously swirled regarding Expedia's desire to divest its stake, so it should come as no surprise that Expedia stock is also up nearly 5% this morning. All things considered, I can't blame the market for driving up shares of all three travel-centric companies today.