Priceline Packs Its Bags, Buying Kayak for $1.8 Billion

by has snapped up its younger rival Kayak in a $1.8 billion shares-and-cash deal, the companies announced late Thursday.

Kayak Software Corp., whose websites and mobile apps allow customers to comparison shop for flights, hotel rooms and car rental bookings, only went public four months ago. Bloomberg News reports that Kayak made $91 million in its initial public offering by selling 3.5 million shares at $26 apiece. Kayak shareholders will receive $40 a share from the sale to Priceline.

Priceline Chief Executive Jeffery H. Boyd told the Wall Street Journal that the company was attracted to Kayak's position as a good source of leads for advertisers and its consistent profitable growth.

The deal will be the largest acquisition ever for The company was founded in 1998 and acts as a travel agent, collecting fees and commissions on reservations.

Kayak's focus on searching other sites to compare prices could be a solid new revenue stream for Priceline. The engine makes most of its money from referrals and advertisers.

Online travel sales may reach $151.9 billion by 2016, from $107.4 billion in 2011, according to EMarketer Inc.