Austin-based HomeAway (NASDAQ: AWAY) has agreed to be acquired by Expedia, Inc. (NASDAQ: EXPE), both companies announced this afternoon. HomeAway will continue to operate out of Austin on a mostly independent basis, company leaders said.

Under the deal, Expedia will acquire all of HomeAway’s brands for about about $3.9 billion — roughly $1 billion cash and the remainder in Expedia common stock. That’s a per-share price for HomeAway shares of $38.31.

Both companies’ boards of directors unanimously approved the deal. But it will still have to clear regulatory hurdles. The transaction is expected to close in the first quarter of next year.

HomeAway shares climbed fast on the news, increasing by nearly 23% in after-hours trading. Expedia shares rose slightly.

Brian Sharples, President and CEO of HomeAway

“Today we’re announcing business model changes, including the addition of a traveler service fee in mid-2016, which will dramatically change our ability to compete and thrive in the coming years,” said Brian Sharples, chief executive officer of HomeAway. “Better monetization will allow us to accelerate revenue growth, but most importantly will provide more resources for an even better product and service experience for our owners, property managers and travelers.”

The move is expected to put HomeAway in front of many more travelers through Expedia’s huge reach.

“I believe this combination will turbo-charge our growth and industry leadership for years to come,” he said.

HomeAway has worked with Expedia as a distribution partner in the past two years, and he said both companies face similar challenges in attracting users through mobile platforms and dealing with global payment systems.

Expedia has largely been focused on primary urban vacation destinations, while HomeAway’s core business is at beach, ski and other resort destinations.

For Expedia, the deal provides a strong play in the booming sharing economy sector where Airbnb has often overshadowed HomeAway and other competitors.

“We have long had our eyes on the fast growing ~$100 billion alternative accommodations space and have been building on our partnership with HomeAway, a global leader in vacation rentals, for two years,” said Dara Khosrowshahi, Chief Executive Officer, Expedia, Inc. “Bringing HomeAway into the Expedia, Inc. family and adding its leading brands to our portfolio of the most trusted brands in travel is a logical next step.”

Dara Khosrowshahi
President and CEO of Expedia, Inc.

He said 1 in 4 travelers last year turned to alternative accommodations for the travel needs.

“All of us have witnessed not only the incredible growth of the sharing economy but also the substantial growth of alternative lodging in particular,” he said.

Expedia, based in Bellevue, Washington, has been in acquisition mode for several months as it and other travel companies compete. Expedia acquired Travelocity in February for $280 million in cash. And its $1.3 billion merger with travel site Orbitz was approved by federal regulators in September.

HomeAway, which recently opened a fifth Austin office at the Domain, has also been acquiring companies in recent years. It most recently announced the acquisition of Dwellable, a Seattle-based travel app. HomeAway’s acquisitions include VRBO.com and VacationRentals.com.

“It will be essential run out of Austin on a standalone basis,” Khosrowshahi said during a conference call this afternoon.

Even before the acquisition talks began, HomeAway had begun working on a major business transition toward online-only bookings, Sharples said. Among the big changes are a travel service fee that will begin in 2016, which is expected to drive more revenue because of the large volume of bookings it will affect.

Sharples said HomeAway will lower commission rates for most paper-booking suppliers and provide “meaningful incentives” to subscribers based on bookings they do on HomeAway’s platform.

He said 2016 will be “a transition year.”

HomeAway officials contacted by Austin Inno declined to provide any additional comment on how the deal may impact its nearly 2,000 employees worldwide or how it may impact executive-level positions as the acquisition proceeds.

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