Priceline.com Acquires Kayak For $1.8 Billion, Will Allow Kayak To Continue To Operate Independently

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Online travel site Priceline.com just announced that it has agreed to acquired the travel search engine Kayak for $1.8 billion. Priceline will pay $40 per share for Kayak. About $500 million of the purchase price will be in cash and the other $1.3 billion in equity and stock options.

Kayak was founded in 2004 by a team of online travel industry veterans, including Steve Hafner (CEO) a co-founder of Orbitz, Paul English (CTO) a former VP of technology at Intuit, Terrell Jones (Chairman), founder of Travelocity, and Greg Slyngstad (Director), founder of Expedia. The company received a total of about $229 million in venture funding for major Silicon Valley firms, including General Catalyst Partners, Sequoia, Accel Partners, and others. The company had its IPO this August and currently processes about 100 million user queries per month.

On a conference call about the acquisition this afternoon, Priceline noted that Kayak will continue to operate independently. Kayak, Priceline argued, will profit from this partnership in its plans to expand internationally. Priceline also noted that this transaction will help Kayak to get deeper into the hotel business.

“Paul English and I started Kayak eight years ago to create the best place to plan and book travel,” said Steve Hafner, Kayak Chief Executive Officer and Cofounder in a canned statement today. “We’re excited to join the world’s premier online travel company. The Priceline Group’s global reach and expertise will accelerate our growth and help us further develop as a company.”

For Priceline, this is a rare acquisition. The company only acquired four companies so far: Agoda.com, Booking.com, TravelJigsaw and Active Hotels.

So far, the stock market has reacted rather negatively to the news. Priceline’s stock is down about 2% in after-hours trading.