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Expedia snaps up rival Orbitz for $1.3 billion

The two online travel companies will come together in hopes of fighting Priceline, Expedia's much larger competitor.

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Expedia has kept up its buying streak, following its recent purchase of Travelocity. Mike Coppola/Getty Images

Expedia has agreed to buy Orbitz for $1.3 billion, bringing together two pioneers of online travel.

The deal, announced Thursday, adds to Expedia's long list of travel sites, including Hotels.com, Hotwire and Trivago. The company also last month just finished its acquisition of Sabre's Travelocity for $280 million and in November bought Australia's Wotif Holdings for about $612 million.

A proliferation of travel and home-sharing sites -- including Hipmunk, Kayak and Airbnb -- has motivated the leaders of online travel to keep gobbling up other players in hopes of maintaining and growing their customer bases. For example, Priceline -- Expedia's much larger rival -- in 2013 bought Kayak, which aggregates ticket information from other websites, for $1.8 billion.

The deal also shows online travel agencies' efforts to reduce their reliance on Google and TripAdvisor for traffic, with the companies buying up meta-search sites like Trivago and Kayak, or moving into more categories, like when Priceline last year agreed to buy restaurant-reservation site OpenTable for $2.6 billion.

However, Janney analyst BrianMcGill cautioned that the deal may face regulatory problems, since Expedia -- while still only controlling a small slice of the $1.3 trillion travel industry -- will hold 75 percent of the domestic online travel agency market.

Expedia, founded in 1996, will get Orbitz's namesake website, along with consumer sites CheapTickets, ebookers and HotelClub, as well as business-travel sites.

Shares of Orbitz, founded in 2001, were up 22 percent Thursday, at $11.72, just under the $12 cash offer price. Expedia's shares were up, too, rising nearly 15 percent to $89.57, with the company expected to use the deal to boost its traffic while also trimming expenses for both companies thanks to consolidation.

TripAdvisor's stock also shot higher, up 22 percent amid its better-than-expected quarterly revenue report Wednesday night, as well as the continued mergers in the online travel space.

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