Lastminute snaps up First Option

January 12, 2004 |

U.K. based online travel retailer Lastminute.com continued its acquisition spree by buying U.K. hotel booking agent First Option.

Online travel retailer Lastminute.com today continued its acquisition spree by buying hotel booking agent First Option and said trading in the traditionally weak first quarter had been strong thanks to a rise in people escaping the winter blues by booking holidays and flights.

The company, which became synonymous with the dotcom boom and bust but has recovered to lead consolidation in the online travel sector, said the total value of transactions was ahead of expectations, particularly in flight sales.

Lastminute.com will pay £12.1m for First Option, which owns 21 retail locations at airports and railway stations and also sells hotel bookings through a call centre in Stockport. Owner and founder Sheetal Kapoor will take £10.5m in cash and the remainder in Lastminute shares.

The company plans to rebrand all of the sites as Lastminute.com, giving it a physical retail presence for the first time. Lastminute also plans to develop terminals that will remain on even when the kiosks are closed, allowing travellers to book hotels through the website at short notice.

Accounts for the year to March 2003 show that First Option, which Lastminute said would also broaden the range of hotels it was able to offer, made a pre-tax profit of £700,000 on revenues of £7.5m.

‘The acquisition of First Option creates an opportunity for further growth in a category where the margins are good and the returns are sustainable. Hotels is a product category which has seen great adoption by consumers online,” said Lastminute.com co-founder Brent Hoberman.

“The presence at principal UK railway stations and airports will add significantly to the overall reach of Lastminute.com and continues the delivery of our mission to make Lastminute.com a part of people’s daily lives. This acquisition again accelerates our growth in the UK, our largest market and moves us to a leading position in the online hotels category,” he added.

In the past two years, Lastminute has been on the acquisition trail in an effort to boost revenues and improve its margins.

Using the money raised from its high profile flotation in 2000, just weeks before the dotcom crash, it has bought a range of complementary travel businesses and rivals including Travelprice.com, Travelselect.com, Destination Holdings and Holiday Autos.

The strategy appears to have worked as the company last year announced its first annual profit, before tax and other exceptional items, and has seen its share price continue to rise. The milestone also coincided with the departure of co-founder and dotcom high flyer Martha Lane Fox.

But despite establishing itself, alongside Ebookers, as one of the two prominent UK travel sites, speculation has continued to mount that Lastminute itself could be a takeover target for US giants including Expedia, owned by Barry Diller’s InterActive, and Sabre Travel-owned Travelocity.

Some analysts also continue to suspect that the company’s shares are overvalued given that much of its growth has been driven by acquisitions. Last month a furious row flared up between investment house Collins Stewart and Lastminute after analysts at the stockbroker claimed its shares were “hideously overvalued”. Lastminute shot back, claiming that the research note was “riddled with errors”.