What: Shares of vacation rental company HomeAway (NASDAQ:AWAY.DL) surged on Thursday following the announcement that online travel giant Expedia (NASDAQ:EXPE) was acquiring the company. At 12:15 p.m., the stock was up about 25%.

So what: The deal for HomeAway is valued at roughly $3.9 billion, with Expedia exchanging $10.15 in cash and 0.2065 of a share of its own stock for each share of HomeAway. Based on Expedia's closing price on Nov. 3, this deal values each share of HomeAway at $38.31.

Expedia is a major player in the online travel business, allowing customers to book flights and hotel rooms through its website and apps. But the company doesn't have a direct presence in the fast-growing alternative accommodations market, which is currently occupied by Airbnb and HomeAway.

According to Expedia CEO Dara Khosrowshahi, this market represents a big opportunity. "We have long had our eyes on the fast growing ~$100 billion alternative accommodations space and have been building on our partnership with HomeAway, a global leader in vacation rentals, for two years." Khosrowshahi said. "Bringing HomeAway into the Expedia, family and adding its leading brands to our portfolio of the most trusted brands in travel is a logical next step."

Now what: HomeAway's stock has struggled since the company went public in 2011 at a price of $27 per share. Shares of HomeAway closed on Nov. 3 at $31.74, not much higher than the IPO price, and the stock has dipped well below the IPO price on multiple occasions. HomeAway has been growing revenue at a healthy pace, with 19.8% year-over-year growth adjusted for currency reported during the latest quarter, but GAAP earnings have failed to keep pace.

The Expedia deal gives HomeAway the opportunity to leverage the Expedia platform and potentially boost its growth. According to HomeAway CEO Brian Sharples, "We're eager to benefit from Expedia's distribution, technology and expertise, which will allow us to provide an even better product and service experience for our owners, property managers and travelers. In this way, I believe our combination with Expedia will turbocharge our growth and industry leadership for many years to come."

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