Analysts say TripAdvisor deal could be precursor to more value-creating moves

Shares of TripAdvisor (TRIP) jumped on Thursday after the company announced plans to buy Liberty TripAdvisor Holdings (LTRPA) in a deal valued at about $435M. Wall Street analysts believe the deal could be a precursor to another transaction.

AGREEMENT: Under the terms of an agreement announced this morning, TripAdvisor will acquire Liberty TripAdvisor, and the shares of Liberty TripAdvisor prior to the effective time of the merger will be converted into the right to receive 25.67c per share in cash, totaling approximately $20M. The transaction is expected to close in the second quarter of 2025. TripAdvisor will acquire all of Liberty TripAdvisor’s outstanding shares, which include Series A and Series B common stock. In addition, Liberty TripAdvisor’s 8% Series A Cumulative Redeemable Preferred Stock will be converted into cash and TripAdvisor common stock, with the preferred shareholders set to receive about $42.47M in cash and 3.04 million shares of TripAdvisor stock. Liberty TripAdvisor’s 0.50% Exchangeable Senior Debentures of approximately $330M will be repaid in accordance with their terms, the companies said. Upon consummation of the merger, TripAdvisor said it plans to retire approximately 27 million shares of TripAdvisor common stock currently held by Liberty TripAdvisor, net of approximately 2.4 million shares. The implied share price for the acquisition of the shares of TripAdvisor common stock from Liberty Tripadvisor is $16.21, reflecting a premium of approximately 16% based on the 10-day volume-weighted average share price as of December 17, TripAdvisor added.

As a result of the transaction, TripAdvisor will simplify its corporate structure by eliminating the dual-class share system, which had given Liberty TripAdvisor a controlling stake in the company. The transaction was unanimously recommended by the TripAdvisor special committee comprised of independent directors and advised by legal and financial advisors, and the board of directors of both TripAdvisor and Liberty TripAdvisor have approved the transaction. The transaction remains subject to customary closing conditions, including the approval of a majority of Liberty TripAdvisor’s stockholders. If the deal does not close by March 27, 2025, TripAdvisor has agreed to provide a loan to Liberty TripAdvisor to help manage any remaining obligations related to its Exchangeable Debentures.

EXECUTIVE COMMENTARY: TripAdvisor President and Chief Executive Officer Matt Goldberg commented that the transaction “presents a unique and favorable opportunity to simplify our capital structure, create strategic flexibility, and retire a large portion of our shares, while maintaining a healthy balance sheet.” Goldberg added: “We believe this transaction marks a new era for TripAdvisor and we are excited to continue to pursue our strategic vision across travel and experiences.”

WHAT’S NOTABLE: In February, Liberty TripAdvisor announced that it received a merger proposal and TripAdvisor announced the formation of a special committee of independent directors to evaluate potential strategic alternatives. In May, though, the special committee stated that there was no viable transaction with a third party that would be in the best interests of shareholders. In November, TripAdvisor said it didn’t repurchase any shares in the third quarter because it was still considering a “variety” of strategic alternatives.

ANALYST COMMENTARY: BTIG said the deal “effectively amounts to a buyback with the added benefit that it is super voting shares that it is bringing in.” This transaction will clean up the control structure and Liberty Tripadvisor’s “unwieldy balance sheet” was an impediment to any potential buyer, added the analyst. Importantly, the firm says this opens the door to a potential exploration of strategic alternatives. The firm, which notes that its estimates are under review, has a Buy rating and $20 price target on TripAdvisor shares.

Bernstein says the transaction will result in the simplification of TripAdvisor’s capital structure into a single class of shares with no controlling stockholder, creating more strategic flexibility for the company. “This should free up management to focus on value accretive endeavours” such as buying more stock or optimizing the ownership structure of Viator and the Fork, the firm contends.

Meanwhile, DA Davidson kept a Neutral rating on TripAdvisor after the company announced plans to acquire Liberty TripAdvisor Holdings for a total merger consideration of $435M. The deal is effectively a buyback of 19% of TripAdvisor’s common stock “at a reasonable price,” the analyst tells investors in a research note of its own. The firm believes the transaction will simplify TripAdvisor’s corporate structure and will align the voting power and economic ownership for all shareowners. Additionally, TripAdvisor management should have more strategic flexibility as well as one less distraction as the company tries to turnaround its legacy branded Tripadvisor.com business and maximize value at Viator, contends DA Davidson. The firm also sees potential expansion of TripAdvisor’s investor base and the possibility of additional index inclusion.

PRICE ACTION: In late morning trading, shares of TripAdvisor are up 8.3% to $14.03. Other companies in the space include Expedia (EXPE) and Booking (BKNG).