USA will purchase up to 75 percent of Expedia's outstanding shares, totaling up to 37.5 million shares. Microsoft has agreed to transfer all of its 33.7 million shares and warrants in Expedia to USA.
USA also announced it will acquire National Leisure Group, which provides fulfillment services to sellers of vacation packages and cruises. USA will use the acquisitions to further its interests in online travel. The company also said Monday it will launch a new cable station dubbed USA Travel Channel, which will primarily be produced by USA's Home Shopping Network.
USA's acquisitions Monday underscore the ambitions of Chief Executive Barry Diller to blend new and traditional media with shopping. Diller already owns the USA Network family of cable stations, HSN, Ticketmaster Online, CitySearch and the Hotel Reservations Network.
The deal is also USA's latest purchase of a Microsoft-owned Web property. In 1999, USA acquired Microsoft's Sidewalk city guides for $240 million in stock and integrated the sites into CitySearch.
Since his failed attempt to acquire Web portal Lycos in 1999, Diller has slowly acquired companies involved in every step of the e-commerce process. USA now owns companies that develop e-commerce sites, create shopping databases and fulfill orders via television and the Web. The company already has agreements with the National Football League and the National Basketball Association to sell tickets to events online.
"I can't think of a better knitting together of the convergence of entertainment, information and direct selling," Diller said in a statement regarding the two acquisitions Monday.
With the Expedia acquisition, Diller will become chairman while Expedia's Richard Barton will remain president and CEO. The purchase now awaits the approval of Expedia's shareholders, who will have the option of exchanging each share for the following package:
$17.50 in USA stock, with a collar between $23 and $31 per share;
between 0.3873 and 0.4524 of a seven-year warrant to acquire USA stock at $35.10 a share; and
0.35 of a share of new USA convertible, redeemable, preferred stock with a $50 face value.
After the acquisition, USA will own 67 percent to 75 percent of Expedia's equity and more than 90 percent of its voting interest.
In addition, USA has committed $75 million in on-air promotion for Expedia during the next five years and an option to participate in the USA Travel Channel.
Separately, Expedia said Monday it expects income before charges to reach $12 million to $14 million, or 20 cents to 23 cents per diluted share, for the June quarter. That soundly beats Wall Street's estimates of 9 cents a share.
Terms were not disclosed for the National Leisure Group deal.