Instant Analysis: Priceline Group Inc to Acquire Momondo Group for $550 Million

By Eric Volkman Markets Fool.com

What happened?

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The seemingly endless string of acquisitions in the online travel industry (OTA) will soon be one deal longer. Priceline Group (NASDAQ: PCLN) announced that it has reached an agreement to acquire European peer Momondo Group for $550 million in cash.

Momondo Group, headquartered in the U.K. and Denmark, operates the momondo travel portal, which offers hotel booking, flights, and car rentals -- similar to Priceline. It also runs the popular Cheapflights.com website.

Image source: Getty Images.

In its press release trumpeting the acquisition, Priceline quoted its CEO Steve Hafner as saying, "Momondo and Cheapflights have built great products serving loyal users across Europe. We're looking forward to learning from them and sharing best practices as our brands expand globally."

The acquisition is subject to approval from the relevant regulators. Priceline expects it to close by the end of this year. Once Momondo Group is absorbed into Priceline, it will become a component of the company's Kayak brand.

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Image source: The Motley Fool.

Does it matter?

Priceline and its arch-rivalExpediahave been building up their portfolios over the past several years. So it was no great surprise that the former would snap up yet another travel asset, in this case, a robust European OTA that also operates a successful discount airfare site.

On the back of several incrementally improving big European economies, Momondo Group has posted good results recently. For the company's fiscal 2016 first quarter -- its latest publicly disclosed set of figures -- it booked revenue of 20.5 million pounds ($25.7 million), showing year-over-year growth of 23%. It did not reveal its profitability (or lack thereof) but did offer the encouraging tidbit that, combined, momondo and Cheapflights.com notched a new record for visits during the quarter at 95 million.

Compared to the size and sprawl of Priceline as a whole, Momondo Group is fairly small, so we shouldn't expect a huge impact on its parent-to-be's results. Still, the acquisition will give Priceline a stronger presence in Europe, and shareholders should consider the acquisition to be a positive move as the company looks to expand.

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Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group. The Motley Fool has a disclosure policy.