(By Balachander) Kayak Software Corp. (NASDAQ: KYAK) shares were lowered to "Hold" from "Buy" by Deutsche Bank analyst Lloyd Walmsley after the online travel site agreed to be acquired by Priceline.com Inc. (NASDAQ: PCLN) for $40 per share in cash/stock.
Walmsley raised price target on the stock to $40 from $37.
The analyst believes the deal helps KAYAK with two big initiatives: 1) it puts Priceline in the booking path and 2) helps with international expansion. Furthermore, we believe there are significant revenue synergies between the two companies.
Furthermore, Walmsley believes there are significant revenue synergies between the two companies.
"We think there is a less than 20 percent chance another bidder would enter the fray," Walmsley wrote in a note. "Expedia (NASDAQ: EXPE) would be the only other company that would make sense, and would have had multiple opportunities to acquire KYAK in the past if it really wanted to."
"Google (NASDAQ: GOOG) is also unlikely given the overlap in meta-search strategies, and more importantly, the regulatory scrutiny," Walmsley said.
"Risks on the downside include the transaction not being approved for regulatory scrutiny, which we see as a low probability given the $250m domestic revenue run rate vs. the $3B domestic travel ad market," the analyst wrote. "Upside risk includes a higher acquisition offer."
Shares jumped 27.71 percent to trade at $39.64 on Friday. Over the past year, the stock has been trading between $26.01 and $40.41.