Business Context and Reporting Period
This Form 8-K, filed on December 21, 2012, reports that Expedia, Inc. entered into a definitive agreement to acquire a controlling interest in trivago GmbH, a leading metasearch site headquartered in Düsseldorf, Germany. The transaction is expected to close during the first half of 2013, subject to regulatory approvals including the German Federal Cartel Office.
Key Financial Metrics and Transaction Structure
The acquisition involves a mixed cash and stock consideration totaling approximately €476.6 million. The filing does not provide Expedia's current revenue, profit, or cash flow metrics as this is a transactional report rather than a periodic financial statement.
- Total Consideration: Approximately €476.6 million.
- Cash Purchase Price: €426,398,400 payable to sellers at closing.
- Stock Consideration: Expedia common stock valued at €42,632,216 (based on a 30-day trailing average), issued in five equal increments over five years to managing sellers.
- Direct Payment to trivago: €7,608,399 in cash to retire employee options.
- Escrow: €50,000,000 of the cash purchase price will be held in escrow for up to 18 months as security for representations and warranties.
- Ownership Structure Post-Closing: Expedia will acquire approximately 62% of trivago's outstanding securities. Managing sellers will retain 36%, and employees will hold 2% via options.
Material Changes and Future Ownership
The primary material change is the entry into a Share Purchase Agreement and a Shareholders Agreement. The Shareholders Agreement includes put/call provisions allowing Expedia to purchase, and sellers to sell, the remaining shares held by managing sellers.
- Call/Put Rights: Expedia has the right to purchase 50% of managing sellers' shares on the third anniversary and 100% on the fifth anniversary of the acquisition.
- Valuation Method: Future purchase prices for these shares will be based on the fair market value at the time of exercise.
- Full Ownership Potential: If all call/put rights are exercised, Expedia anticipates owning 100% of trivago's outstanding securities.
Guidance, Risks, and Contingencies
The transaction is contingent upon the satisfaction of customary closing conditions, specifically regulatory approvals from the German Federal Cartel Office and other applicable anti-trust agencies. The filing notes restrictions on Expedia's access to customer and business partner information of trivago under the Shareholders Agreement. Expedia is required to use commercially reasonable efforts to register the acquisition shares for resale on Form S-3.
Key Facts for Investor Verification
- Confirmation of regulatory approval status from the German Federal Cartel Office and other jurisdictions.
- The actual closing date of the transaction, currently projected for the first half of 2013.
- The final valuation of the stock component, which depends on the 30-day trailing average of Expedia's stock price prior to closing.
- Details regarding the escrow release conditions and any potential deductions.
- Future exercise of call/put options to determine the timeline for 100% ownership of trivago.