USA Buys 75% of Expedia

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USA Networks Inc. has agreed to buy a 75 percent stake in online travel
company Expedia Inc. in a deal valued at about $1.3 billion, and it will use
that purchase to launch an interactive cable travel channel beginning next

In a complicated deal, USA will buy out Microsoft Corp.'s 70 percent interest
in Expedia, or about 33.7 million interest shares, for USA stock. In addition,
USA will offer Expedia shareholders a similar deal, which would mean the
issuance of at least another 4 million shares.

In a conference call with analysts, USA vice chairman Victor Kauffman said
the deal gives Expedia shareholders at least $35 per share in 'hard

Expedia will continue as a separate, publicly traded company, although USA
will own between 67 percent and 75 percent of Expedia equity and more than 90
percent voting control. USA chairman Barry Diller will also become chairman of

The acquisition -- along with a separate deal to buy online cruise and
vacation-package vendor National Leisure Group Inc. -- will complement USA's
existing online properties, TicketMaster/CitySearch and Hotel Reservation
Network, allowing travelers to book transportation, hotel rooms and
entertainment packages all through one site.

USA plans to use the same properties -- along with NLG's substantial
travel-infomercial library -- to launch its own interactive digital-cable
network, USA Travel Channel, sometime next month.

Diller said the travel channel would be launched in August, initially
incubated on USA's Home Shopping Network and America's Store shopping

The new channel will essentially be a commerce site, allowing viewers to buy
vacation packages they see on the channel either through the telephone or via
Expedia's Internet site.

Diller said the deal -- more than two years in the making -- is the
embodiment of his vision of the convergence of the television and the home

'This is a significant development for us,' Diller said in the conference
call. 'This really does say that we're getting to be the real deal.'

USA stock rose nearly 5 percent on the news, closing Monday at $26.52, up
$1.26 each. Expedia stock fell $3.81 each to $44.89 per share.

Expedia is one of the largest online travel sites, and it expects
fourth-quarter income before noncash items of $12 million to $14 million, or 24
cents to 29 cents per share.