A Possible Sale of Travelzoo… At The Lows (TZOO, EXPE, PCLN, OWW)

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Travelzoo Inc. (NASDAQ: TZOO) is up for sale.  At least that is what Reuters is reporting with a ‘citing sources’ of those familiar with the situation.  The Internet travel information and booking site offers deals on flights, hotels, cruises, and vacation packages.  What is so interesting here is that the stock was within about 2% of a 52-week low as of yesterday.

Reuters noted that the company is in the process of hiring a financial advisory firm after having received some indications of interest from other travel outfits and from private equity shops.  Which firms this would be is anyone’s guess but the company is now easily affordable as its market cap was $336 million as of Tuesday’s close.  Expedia Inc. (NASDAQ: EXPE) is worth about $4.2 billion in market cap priceline.com Incorporated (NASDAQ: PCLN) is worth almost $37 billion in market cap, which would imply that either company could easily make this acquisition.  Orbitz Worldwide, Inc. (NYSE: OWW) is worth only $318 million, so that might be a stretch.

Travelzoo’s consensus earnings estimates are $1.55 EPS and $166.3 million in sales for 2012 according to Thomson Reuters.  less than 20-times expected earnings and 2-times expected sales is cheap for the growth of the online travel sector when you start comparing this to peers today but the $21.06 close on Tuesday compares to a 52-week range of $20.68 to just over $100.00 at the peak of the last year.

This merger news is something we would consider to be a rumor for now and it might even seem suspect on the surface, but shares are indicated up 30% at $27.50 on the news.

JON C. OGG