Microsoft is selling its two-thirds ownership in online travel agency Expedia to USA Networks in a $1.5 billion deal that will turn USA Networks into the world's largest online travel company.
Redmond IPO'd Expedia in 1999, retaining majority control.
USA Networks, which owns the Home Shopping Network (HSN), its own USA Network and the Hotel Reservation Network, said that it's also buying online cruise and vacation package company National Leisure Group.
When the dust settles USA Networks' combined travel holdings are expected to do about $4 billion in bookings this year, a better than 30% market share.
At least that's the optimistic view of the deal.
Pessimists said Microsoft is departing the online travel business in the face of competition by the major airlines to sell their tickets over the Internet directly to consumers. The airlines have set up sites that compete directly with Expedia to save the commissions they pay Expedia and conventional travel agents.
By selling its interest to USA Networks Microsoft gets a stake, albeit far smaller, in a more diversified operation that isn't totally dependent on travel sales for its survival. USA Networks' various units sell everything from TVs to concert tickets.
Microsoft will get 3%-5% of USA Networks. The exact percentage depends on how many shares are tendered by other shareholders. They are being offered the same terms as Microsoft.
USA Networks said that it's willing to buy up to 75% of all the outstanding Expedia shares. The amount it buys from Microsoft and others will be pro-rated if more than 75% of the shares are tendered.
The terms of the USA Network tender offers Expedia shareholders a combination of common shares, preferred shares and warrants.
Shareholders will get $17.50 worth of USA common stock, or 0.5645 to 0.7609 shares, for each Expedia share. The exact conversion formula is based on a collar of $23-$31 per USA share.
Microsoft owns 33.7 million shares and warrants, which means the USA shares it gets will be worth about $590 million.
In addition Expedia shareholders will get 0.35 shares of convertible redeemable preferred stock with a face value of $50. For Microsoft that's worth another $590 million.
Finally, USA Networks will issue between 0.3873 and 0.4524 of a seven-year warrant to buy USA common stock at $35.10 a share for each Expedia share. Assuming a USA share price of $27 the exchange rate will be 0.4176 and Microsoft's exercise price will be $494 million.
Microsoft's piece of the deal includes an agreement to position Expedia as MSN's primary travel partner for at least the next four years.
USA shares jumped from $25 to just over $27 immediately after the deal was announced Monday.
Q: Why is the .200 batting average referred to as ``the Mendoza line?''
AG: The term pays homage to Mario Mendoza, a weak-hitting shortstop for the Mariners, Pirates and Rangers. Mendoza's lifetime batting average of .215 was orginally referred to as the Mendoza line, but the more common usage currently is to refer to .200 as the Mendoza line. The orginator of the term, according to ``Rotisserie League Baseball,'' was heavy-hitting George Brett, who is said to have remarked, ``The first thing I look for in the Sunday papers is who is below the Mendoza line.''
Q: If a batter is walked, it is not counted as an at-bat. So if a batter is walked with the bases loaded, how can the batter be credited with an RBI if his at-bat did not count?
AG: For the same reason that a batter who sacrifices a runner home receives an RBI, even though a sacrifice does not count as an at-bat either. The rationale is that the batter's action at the plate - whether a walk or a sacrifice - is what caused the run to score. So he receives an RBI. Baseball, despite its sometimes-confusing idiosyncracies, usually makes sense.
Q: The Mariners have a large banner in the Kingdome advertising the internet address of their web page (www.mariners.org). But there must be a mistake - ``.org'' is supposed to be used by non-profit organizations. Shouldn't the Mariners' web address be www.mariners.com, since ``.com'' is used by businesses, including all other major league teams? Or are the M's a non-profit?
AG: To the M's ownership, the team probably seems like a non-profit, what with all its oozing red ink. The M's aren't a non-profit, but their web page does indeed belong at ``.org.'' The reason is: The M's were the first pro sports team to go online, back in November 1994 when web addresses were not quite as defined as they are now; they were assigned ``.org'' at that time. No tears should be shed over the M's being lost in cyberspace. Their web site, according to team officials, averages 7 million hits a month.
And the Mariners could not switch now to www.mariners.com, even if they wanted to. That web site is owned by Cardiac Mariners Inc. of Los Gatos, Calif. That firm, which sounds as if it rents sailboats to people with heart problems, is actually a high tech medical start-up company.
Have a baseball question for John Marshall, the P-I Answer Guy?
Phone: 448-8288
Fax: 448-8216
e-mail: johnmarshall@seattle-pi.com
q
