Travelocity, Preview Travel Become One

Online travel sites Travelocity.com and Preview Travel (Nasdaq: PTVL) announced a merger today that will create an e-commerce entity with more than 17 million registered members and more than $1 billion (US$) in projected 1999 sales. The companies say that the merger will create the largest e-commerce site in the travel category and the third largest e-commerce site overall.

The new venture expects to have more than eight million unique visitors each month, which, according to Media Metrix, would make it 50 percent bigger than the next-largest online travel agency. Preview Travel reported gross bookings of $200 million in 1998 and $166 million in the first half of 1999.

Winning Combination

Under the terms of the deal , Sabre (NYSE: TSG), the parent company of Travelocity.com, will own 70 percent of the combined entities, and existing Preview Travel stockholders will own the remaining 30 percent. Sabre will contribute the assets of Travelocity.com plus $50 million in cash in exchange for its stake.

"We have been committed to unlocking the value of Travelocity.com for Sabre's shareholders," said Donald Carty, chairman of Sabre. "Through the new ownership structure, we've created a pure Internet play in which our shareholders will own a majority stake of the third largest e-commerce site. In addition, this transaction provides Travelocity.com with access to Internet currency, and at the same time preserves the product development synergies that exist between Travelocity.com and Sabre."

Terrell B. Jones, president of Travelocity.com, will be the president and CEO of the new company. James Hornthal, founder and chairman of Preview Travel, will be vice chairman. The combined companies will have its headquarters in Forth Worth, Texas.

Five-Year Deal With AOL

At the close of the merger transaction -- which is expected in the first quarter of 2000 -- Travelocity.com will commence a five-year agreement with America Online that will be worth up to $200 million. The deal will place Travelocity reservation terminals across AOL's network of AOL.com, CompuServe, Digital City and Netscape. A portion of the $200 million payment is to be guaranteed, with the remainder tied to performance standards.

Media Metrix reports that AOL's Travel Channel is the top travel destination on the Internet, reaching 7.3 million unique visitors. The deal with Travelocity could increase that total significantly and give the company a clear edge in an industry that could reach $30 billion in sales by 2004.

"By combining the power of Travelocity with the reach of AOL, this exclusive alliance will offer consumers the highest availability and choice of premium online travel services to AOL customers," Jones said.

Sabre has also extended the existing contract between Travelocity.com and Yahoo! Travel. In addition, Yahoo! has agreed to make a minority investment in the new company. The new venture will also have distribution deals with Lycos, the Go Network and both Excite and @Home.

Stock Impact

Shares of Preview Travel, which has long been considered a takeover target, were up 2-3/8 to 20 in early trading today after the news, but are still well off the stock's 52-week high of 36. Shares of Sabre were unchanged at 43-3/8.