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Gadfly: Priceline's $941 Million Write-Down Is A Bad Sign For Prospective Takeover Targets


While investors are cheering Priceline Group Inc's (NASDAQ: PCLN) third quarter results, one aspect of the report appears to be overlooked.

In Priceline's report, the company wrote down the value of OpenTable by $941 million, which is more than one third of what it paid for the company just two years ago.

According to Gadfly's Gillian Tan, Priceline's acquisition of OpenTable looked pricey since day one. The travel company paid a 53 percent premium for the online restaurant-reservation service. The premium also marked the biggest any company has paid for a large North American company since 2007.

Tan quoted an unnamed banker who said the OpenTable acquisition "shows you that people are willing to pay dearly for the best." The problem is the "best" acquisition doesn't always work out as it should.

Priceline's management cited the markdown to their belief that OpenTable won't grow as quickly as originally believed, especially in the international market.

Perhaps most importantly, Tan noted Priceline's woes in its OpenTable acquisition likely implies the company will continue avoiding M&A activity which serves as a "bad sign" for prospective targets. Rumors and chatter have popped up in the past which suggested Priceline is looking to acquire Tripadvisor Inc (NASDAQ: TRIP) but this scenario appears to be even more likely to not happen now.

On the other hand, Priceline's write-down does leave a window open for Priceline's rivals including Expedia Inc (NASDAQ: EXPE) to "pounce if Priceline stays sidelined in a self-imposed penalty box."


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Posted-In: Bloomberg Gadfly Gillian Tan Online Travel Agencies OpenTable priceline Priceline EarningsOpinion Media