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Priceline names its own price for Kayak: $1.8 billion

The online travel booking site agrees to buy rival Kayak for $1.8 billion.

Priceline spokesman William Shatner
Screenshot by Shara Tibken/CNET
Wonder if Priceline Negotiator William Shatner helped broker this deal.

Priceline today says it has agreed to buy rival Kayak for about $1.8 billion, bolstering its online travel shopping presence.

The deal, valuing Kayak at $40 a share, includes $1.3 billion in stock and $500 million in cash and is a 29 percent premium to Kayak's closing price today. The highest the stock has traded in the past year is $37.

The acquisition, subject to shareholder and regulatory approvals, should close by the end of the first quarter. Kayak will operate independently from the rest of Priceline, and Kayak's current management will remain to run the business.

Priceline is best known for its "name your own price" feature, which allows customers to, well, name their own pricing for hotels, flights, and other travel options. It has performed better than some of its rivals because of its strong focus on international and hotel bookings. But there have also been worries that the grim macroeconomic environment will hurt the company.

Kayak, meanwhile, just went public in July. The company allows users to quickly and easily compare pricing for hotels, flights, and other travel services. It refers people to online travel agencies -- including some of Priceline's rivals like Expedia -- and also links directly to airlines and other providers. Kayak processes more than 100 million user queries each month through its global Web sites and mobile apps.

Here's what the CEOs of the two companies had to say:

"Kayak has built a strong brand in online travel research and their track record of profitable growth is demonstrative of their popularity with consumers and value to advertisers. Kayak also has world class technology and a tradition of innovation in building great user interfaces across multiple platforms and devices. We believe we can be helpful with Kayak's plans to build a global online travel brand." -- Priceline CEO Jeffery H. Boyd

"Paul English and I started Kayak eight years ago to create the best place to plan and book travel. 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." -- Kayak CEO Steve Hafner