By Jeffrey Dastin and Ankit Ajmera
(Reuters) - Expedia Inc (O:EXPE) on Wednesday said it agreed to buy vacation rental site HomeAway Inc for about $3.9 billion in cash and stock, in a move that could ramp up competition with apartment-sharing startup Airbnb.
Expedia, the world's largest online travel agency by bookings, said it expects the deal to close in the first quarter of 2016 subject to regulatory approval. It expects the takeover will hurt its earnings per share next year but boost results in the long run.
The news marks the largest acquisition in Expedia's history and the latest in a buying spree since 2014, in which the company bought Orbitz Worldwide Inc for $1.3 billion and Travelocity for $280 million.
More importantly, the deal brings into focus the rise of alternative lodging, a market that Expedia values at around $100 billion. It agreed to pay a roughly 20-percent premium above HomeAway's share price.
Expedia's stock rose nearly 3 percent in after-market trade.
S&P Capital IQ analyst Tuna Amobi called the purchase "transformational," saying it lets Expedia "participate in the sharing economy, which might be the next frontier" for leisure travel.
While Expedia now markets hotel rooms, overlapping little with Airbnb, analysts have warned that competition with the startup could become fierce by 2018.
Airbnb is expected to double bookings to about 80 million nights this year alone. By contrast, Expedia booked some 150 million nights in 2014.
In an interview, Expedia Chief Executive Dara Khosrowshahi said HomeAway will become "more aggressive" in marketing urban apartment shares that face off with Airbnb.
By contrast, beach and ski rentals account for a large portion of HomeAway's bookings.
HomeAway's business model has also differed from that of Airbnb, which lets homeowners add listings for free but charges travelers a service fee. Transactions occur on site.
HomeAway instead lets homeowners and property managers pay to advertise listings, with many transactions occurring off-site. However, it has announced that all listings would be available for direct booking by the end of next year, and it is adding a traveler fee.
"We are going to help HomeAway accelerate in its transition from a listings model to a booking model," Khosrowshahi said, adding this will help it compete with Airbnb.
Expedia expects HomeAway to operate somewhat autonomously. It believes HomeAway will earn about $350 million in 2018 before interest, taxes, depreciation and amortization, up from $119.3 million in 2014, both on an adjusted basis.