Preview Travel said Monday it will merge with Sabre Holdings' Travelocity site, in a deal to create a company with 17 million members and more than $1 billion in projected 1999 travel sales.
Shares in Sabre Holdings Corporation (NYSE: TSG, news) closed Friday at 43 3/8. Preview Travel, Inc. (Nasdaq: PTVL, news) closed at 17 5/8, well below its 52-week high of 36.
The new company, to be known as Travelocity.com should be a leader in online travel. The company projects more than 17 million registered memberships and more than eight million unique users -- making it 50 percent larger than the next largest online travel agency site. However, it wasn't clear whether there was membership overlap between Preview Travel and Travelocity.com.
Sabre will retain 70 percent ownership of the new company with the remaining 30 percent owned by Preview Travel stockholders. Sabre will contribute the assets of Travelocity.com plus $50 million in cash in exchange for its 70 percent stake in the new company.
Travelocity.com will also benefit from a new, five-year contract with America Online, Inc. (NYSE: AOL) that makes Travelocity.com the exclusive reservations engine for all travel-related services within the AOL service, including AOL.com, CompuServe, Digital City and Netscape. Travelocity.com will also get travel-related advertising revenue. Yahoo! Inc. (Nasdaq: YHOO) has also extended its existing contract with Travelocity.com and has agreed to invest in the new entity. Lycos, Go Network, Excite, @Home and CompuServe, also have deals with Travelocity.com.
The new company will be a player in what is said to be the largest retail e-commerce category. The online travel market is projected to grow from $7.8 billion in 1999 to $32.1 billion by 2004, according to Forrester Research. Combined travel sales for the two companies in the first half of 1999 was over $467 million.
"Through the new ownership structure, we've created a pure Internet play in which our shareholders will own a majority stake of the third largest e-commerce site," said Donald Carty, chairman of Sabre Inc. in a company statement.
The new business will be headquartered in Fort Worth, Texas. Terrell B. Jones, president of Travelocity.com, will be the president and chief executive officer of the new company. Donald J. Carty, chairman of Sabre Inc., will serve as chairman of the board until a new Sabre chief executive officer is named. James Hornthal, founder and chairman of Preview Travel, Inc., will serve as vice chairman. At the close of the transaction, expected in the first quarter 2000, Preview Travel shares will convert 1:1 into shares of the new company, and Travelocity.com Inc. will trade under the symbol TVLY on the Nasdaq National Market System. AMR's majority-ownership of Sabre is unaffected by this transaction.