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Expedia Group, Inc. 8-K Report, Material Agreement (Jun 19, 2007)

Filed June 19, 2007For Securities:EXPE

Summary

Expedia, Inc. (EXPE) announced on June 19, 2007, its intention to commence a modified "Dutch auction" tender offer to repurchase up to approximately 42% of its outstanding common stock. The offer price range is set between $27.50 and $30.00 per share, with the company aiming to purchase 116,666,665 shares or fewer if not enough are tendered. The company expects to launch the offer the week of June 25, 2007. In conjunction with this tender offer, Expedia also entered into a First Amendment to its Governance Agreement with Liberty Media Corporation and Barry Diller. This amendment adjusts certain governance provisions, notably by raising the "total debt ratio" threshold from 4:1 to 8:1 before requiring approval from Liberty Media and/or Mr. Diller for specified actions. Additionally, Liberty Media's board nomination rights are now tied to 20% of the board size, provided they meet certain ownership thresholds, down from a fixed number of directors. These amendments are contingent upon the tender offer commencing by July 16, 2007.

Key Highlights

  • 1Expedia announced a tender offer to repurchase up to 116,666,665 shares of common stock (approximately 42% of outstanding shares).
  • 2The tender offer will be conducted as a modified "Dutch auction" with a price range of $27.50 to $30.00 per share.
  • 3The tender offer is expected to commence the week of June 25, 2007, and expire the week of August 6, 2007 (unless extended).
  • 4A First Amendment to the Governance Agreement was entered into with Liberty Media and Barry Diller, effective upon the commencement of the tender offer.
  • 5The amendment modifies restrictions on "Specified Actions" by increasing the "total debt ratio" trigger from 4:1 to 8:1.
  • 6Liberty Media's right to nominate directors is adjusted to 20% of the board size, subject to ownership requirements.
  • 7The tender offer is subject to certain conditions, including the receipt of financing.

Frequently Asked Questions

In a modified "Dutch auction" tender offer, shareholders can indicate how many shares they wish to sell and at what price within a specified range ($27.50 to $30.00 in this case). Expedia will then determine the lowest price within that range at which it can purchase the targeted number of shares (up to 116,666,665). All shares purchased will be at that single determined price, provided it's not below a shareholder's stated minimum.

While the 8-K does not explicitly state the reasoning, a significant share repurchase can indicate management's belief that the company's stock is undervalued. It also increases the ownership percentage of remaining shareholders and can return capital to investors who choose to sell their shares in the tender offer.

The amendment to the Governance Agreement, particularly with Liberty Media and Barry Diller, relaxes certain restrictions on Expedia's ability to take significant actions (like amending corporate documents or adopting certain shareholder plans) if its debt levels become high. The threshold for needing their approval has been raised from a 4:1 debt-to-total-debt-ratio to 8:1. This amendment provides Expedia with more flexibility in its financial operations, especially if it takes on debt for acquisitions, while still maintaining oversight rights for key stakeholders under certain conditions.

The tender offer is subject to several conditions, which will be detailed in the upcoming Offer to Purchase. A key condition mentioned in the filing is the receipt of financing for the repurchase. Other conditions may include certain corporate approvals or regulatory requirements.