Why is the boss of Expedia Voyages reviewing his entire organization?
At the beginning of last December, the board of directors of Expedia Voyages made the decision to ask CEO Mark Okerstrom and CFO Alan Pickerill to resign. Officially, they did not agree on the strategy and the performance of the company. Unofficially, Expedia must improve its share price to (perhaps) sell better.
Barry Diller, a media man who controls Expedia
He is 78 years old and has been active in the media for a long time. He is Chairman of the Board of Directors of Expedia via InterActiveGroup (IAC). This group owns more than a hundred media such as Vimeo, Dictionary.com, Investopedia, Tinder, Match or OkCupid.
If he owns less than 10% of the shares of Expedia, he controls 48% of the voting rights of the company. He could increase his voting rights to 49.3%, if he chose to buy more shares.
Barry Diller takes over the reins to exit through the front door
Selling Expedia is a widely shared option. Owners of private equity firms or tech giants like Amazon or IBM might be interested. Still, Expedia’s market cap is $ 16.3 billion, and assuming a buyer pays a premium, the cost could be around $ 20 billion.
For information, the valuation of Booking Holding is over $ 100 billion. By not choosing to replace the CEO, Barry Diller wants to increase the share price by taking radical measures to get closer to his competitor Booking.
Expedia Group has many brands (Too many?)
Expedia Group is the world’s second largest online travel player, behind Booking Holdings, and reported more than $ 10 billion in revenue in 2019.
Expedia is active in the airline industry, hotels, vacation rentals, cruises, business travel and car rentals. The group owns in particular: Hotel.com, VRBO, Egencia, Trivago, HomeAway, Orbitz, Travelocity, Hotwire, Wotif, Ebookers, Cheaptickets, CarRentals, Traveldoo, Classic Vacations, SilverRail, ExpediaCruiseShipCenters, Expedia Local Expert … Beyond these brands , Expedia brings its technology solutions to many tourism companies. One of Barry Diller’s options might be to rationalize by killing or ceding certain brands.
Expedia plans to lay off at least 2,800 people
After less than three months of daily work, Chairman Barry Diller and Vice Chairman Peter Kern have taken their first steps towards reshaping the company with the intention of laying off 12% of its workforce. They confirmed that certain projects, activities… will be rationalized. Expedia Group employs 25,400 employees, including part-time employees, at the end of 2019. These layoffs could affect at least 2,800 people.
Reduce operating costs to attract shareholders
Barry Diller has already decided to cut operating costs by $ 500 million in 2020.
The objective is clear, it is to raise the share price. The stock was worth $ 126.16 on February 25, 2019, dipped to $ 94.31 on November 21, and climbed back to $ 121.10 on February 14. Investor confidence is returning. However, the next few days will be difficult because of the Covid-19 crisis.
We are only at the beginning of the transformation of the American group. It seems obvious that Barry Diller will try to sell his stake at a high price. Several companies have evoked to buy Expedia including Amazon. For the moment, private equity firms are in the running.