Uber explored takeover bid for Expedia

Uber has explored a possible bid for Expedia, the $20bn US travel booking website, in what would be by far the ride-hailing company’s largest acquisition as it looks to diversify further and find new avenues for growth.

Uber approached advisers in recent months after the idea of an Expedia acquisition was broached by a third party to examine whether such a deal would be possible and how it could be structured, according to three people familiar with the process. 

A focus of Uber’s discussions was the role of Uber chief executive Dara Khosrowshahi, who served as Expedia’s CEO from 2005 to 2017 and remains a non-executive director on its board. That makes it likely that any approach would be friendly and that he would recuse himself from deal discussions.

The people briefed on the matter cautioned that Uber’s interest was at a very early stage and it was possible that a deal would not transpire. No formal approach has been made to Expedia and there are no current discussions, one person said. 

Khosrowshahi is a protégé of Barry Diller, the serial dealmaker who serves as Expedia’s executive chair. The Uber chief worked at Diller’s internet and media group IAC for seven years and has described him as a “great mentor of mine”.

Uber, Expedia and Diller declined to comment. Following the Financial Times report, Expedia shares were up 3.8 per cent on Thursday, while Uber fell 2 per cent.

In recent years, Uber has expanded from its ride-hailing roots into train and flight bookings, food delivery, corporate logistics and advertising as it seeks to transform itself into a “super app” akin to the multipurpose platforms built by Chinese tech groups such as WeChat.

Khosrowshahi told the Financial Times this week: “Anywhere you want to go in your city and anything that you want to get, we want to empower you to do so.”

Adding Expedia and its booking technology would turbocharge those ambitions. The fourth-largest online travel company generated $12.8bn in revenue for 2023 amid a post-pandemic tourism boom but it cautioned this summer that it faced a slowdown in travel demand.

Uber’s M&A firepower has been strengthened by an 85 per cent surge in its stock over the past year, giving it a market capitalisation of $173bn. In February, the San Francisco-based company reported its first year of operating profitability, driven by resurgent demand for ride-hailing alongside its food delivery, logistics and fast-growing advertising arm.

Chief financial officer Prashanth Mahendra-Rajah said in August that Uber’s “top priority” for deploying capital was investing in growth, including via acquisitions.

Expedia’s stock has risen more than 50 per cent in the past year, but it is only a tenth of its potential suitor’s size, with a market valuation of just below $20bn.

Uber has made few large deals since it went public in 2019. It expanded into food and beverage delivery via the acquisitions of Postmates for $2.65bn and Drizly for $1.1bn, entered the freight and logistics business through the $2.25bn purchase of Transplace and struck a $3.1bn deal for Careem, a Middle Eastern ride-hailing business. 

The company also owns stakes in self-driving car company Aurora and Chinese ride-hailing group DiDi, and recently struck partnerships with Google’s Waymo autonomous taxi service and GM’s Cruise.

In August, Uber secured its first investment-grade credit rating. Executives were keen to ensure that any bid for Expedia would not result in a downgrade back to junk, two people briefed on its interest said.

At Expedia, Khosrowshahi became one of America’s best-paid executives. Uber compensated him for the $160mn in options he gave up on leaving Expedia with options tied to him boosting his new employer’s valuation to $120bn and staying for five years. 

Uber’s stock fell immediately after its listing but has since surged, lifting the value of Khosrowshahi’s options to about $136mn by the end of February. The shares have since risen by another 23 per cent.