Priceline Group is expanding its share of China's online travel market, through a bigger investment in China's Ctrip.com International.
Ctrip, China's No. 1 provider of accommodation reservations, transportation ticketing, packaged tours and corporate travel management, said Monday it has received an additional $250 million investment from Priceline, the No. 1 online travel company.
Ctrip.com International said the investment will be made through a convertible bond. Priceline had made a $500 million investment in the company last summer. Assuming conversion of the two bonds, Priceline will own 10.5% of Ctrip's outstanding shares.
Ctrip is also letting Priceline acquire its American depositary shares in the open market that would increase its stake in Ctrip to 15%.
Meanwhile, Henry Guo, an analyst for W.R. Hambrecht & Co./Summit Research, raised his price target on Ctrip stock to 122 from 80 after the company acquired a 37.6% equity stake in eLong, another online travel service in China, from Expedia(NASDAQ:EXPE) and other investors last Friday.
Ctrip likely will increase its market share, Guo says.
"Ctrip's market position further strengthens after the (eLong) acquisition, especially in the high-end hotel segment, which is competitively and financially important segment for Ctrip," he wrote. "We believe near term Ctrip is likely further involved into industry consolidation M&As, which potentially serves as positive to Ctrip shares."
Ctrip was down 3% in morning trading in the stock market today, near 82, but only after earlier touching an all-time high above 87. Ctrip stock rose 18% Friday, on the eLong deal. It had risen 9% on May 14 after posting a Q1 earnings beat. Ctrip stock has a strong IBD Relative Strength Rating of 97.
The company received ratings upgrades from at least three investment banks earlier this month following its Q1 earnings report.
Priceline stock was down a fraction in morning trading Tuesday, near 1,202.
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