Travelzoo Inc. (TZOO:US) surged the most in almost six years after Reuters said the company has sought an adviser and plans to sell itself.
The shares rose 28 percent to $27.06 at the close in New York, the biggest gain since April 18, 2006. An acquirer would get more than 20 million subscribers and a niche player in the high-end Internet deals business, an area Groupon Inc. (GRPN:US) has been trying to enter, said Dan Kurnos, an analyst at Benchmark Co. Reuters, citing three people it didn’t identify, reported today that the company plans to seek a buyer.
The New York-based Internet media company has more than 24 million subscribers, who receive information about deals for travel, entertainment and other products and services, according to a February regulatory filing. A buyer could take advantage of Travelzoo’s $13.2 million in free cash flow and an “attractive” valuation compared with peers, Kurnos said.
“It wouldn’t cost them a lot to leverage local deals in a profitable way,” Kurnos said in an interview. He has a hold rating on Travelzoo.
A Travelzoo spokeswoman, Lisa Moore, declined to comment.
Travelzoo trades at 14.7 times trailing 12-month earnings, while similar companies trade (TZOO:US) at an average of 26.9 times, data compiled by Bloomberg show.
Buyers who may be interested in Travelzoo’s customer base include Google Inc. (GOOG:US), the leading Web-search provider; Amazon.com Inc. (AMZN:US), the largest online retailer; and LivingSocial.com, the main competitor to Groupon, because they’re all companies that have been trying to increase profit from Internet deals, Kurnos said.
Amazon owns a 31 percent stake in LivingSocial. The book value of the investment was $208 million as of Dec. 31, according to a regulatory filing.
Google and Amazon didn’t immediately respond to telephone messages from Bloomberg seeking comment this morning. Those companies and Travelzoo declined to comment to Reuters, according to the report.
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