Priceline’s OpenTable Deal: Is $2.6 Billion Enough?

Two weeks ago Priceline (Nasdaq: PCLN) announced that it intended to buy OpenTable (Nasdaq: OPEN). The offer of $2.6 billion in cash to buy OpenTable outright represents a premium of roughly 46% over the previous trading level.
Priceline’s offer works out to $103 per share.
OpenTable’s shares initially behaved exactly as you’d expect them to. They jumped to $103 from where they traded before the offer was announced, roughly $70 per share.
But then a curious thing happened. Shares of OpenTable kept rising. It seems that for Priceline’s OpenTable deal, $2.6 billion just isn’t enough.
After rising as high as $106, shares of OpenTable opened the week at $104.54. In terms of the total offer that means OpenTable is trading around $40 million higher than Priceline’s offer of $2.6 billion.

Is another offer on the table?
Priceline’s decision to buy OpenTable makes a lot of sense for the titan of travel bookings. Though you may only know Priceline for its cheesy commercials featuring William Shatner as the ‘Priceline Negotiator,’ the company has built a pretty impressive booking system.
For everything you’ll need on your trip, Priceline appears to be adding restaurant reservations to its offering of flight, hotel, cruise and rental car reservations. Indeed, the company seems to be thriving. It has reported increasing earnings for each of the last seven years, with $1.9 billion in profit for 2013.
Priceline’s growth has not come cheap. When it bought travel-booking site Kayak last year Priceline forked over $1.8 billion. OpenTable will cost Priceline $800 million more, an acquisition of $2.6 billion that has left many stunned.
It also has many investors speculating that there could be additional acquisitions amongst internet companies like Groupon (Nasdaq: GRPN), GrubHub (Nasdaq: GRUB) and Yelp (NYSE: YELP).
Stock prices for these companies all rose on the OpenTable news.
Rumors that Oracle (NYSE: ORCL) was planning to buy Micros Systems (Nasdaq: MCRS) were confirmed Monday morning. The $5.3 billion cash offer confirms that there is significant interest in companies that service restaurants.
Micros sells the point-of-sale systems used by restaurants, college dining halls and other part of the hospitality industry to track orders and generate tabs. OpenTable sells the software and analytics used by restaurants to fill the seats at their tables. The similarities are pretty clear.
So why would OpenTable trade over the offer price of $103?
It may very well be that, for Priceline’s OpenTable offer, $2.6 billion just isn’t enough. Perhaps another player will enter the market and make a higher offer. Certainly that’s what speculators who pushed the stock above $103 are thinking.
It has been suggested that technology giant Google (Nasdaq: GOOGL) might be interested in OpenTable.
I think it’s more likely that John Malone’s Liberty Media (Nasdaq: LMCA) and Liberty Interactive (Nasdaq: LINTA) could make an offer. After all, Liberty holds major positions in Expedia (Nasdaq: EXPE) and TripAdvisor (Nasdaq: TRIP) and the potential synergy between those companies is obvious.
Frankly, I’d be surprised if a higher bidder comes to the table. At its current levels, OpenTable trades at a PE of 112. In order to buy OpenTable someone would have to beat Priceline’s offer, pay off the $91 million breakup fee, and be willing to buy OpenTable at a PE higher than 112.
For Priceline’s OpenTable deal I think $2.6 billion is probably enough.

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