Leading Shanghai-based online travel agency Ctrip.com revealed it intends to pay $88 million in cash to buy 90% of the shares of Wing On Travel, a leisure travel agency headquartered in Hong Kong.
After the deal closes in three to six months, subject to the approval of Wing On Travel shareholders, Ctrip believes the investment and resulting synergies will boost Ctrip's profits about 5% annually.
Wing On Travel offers tour packages, airline tickets and hotels for both inbound and outbound travelers and operates some 20 branches, a call center and the Wing On Travel website.
During an investor conference call late Tuesday evening to discuss Ctrip's fourth quarter 2009 financial results, which saw the company boost profits 57% to $28 million, Ctrip officials said the Wing On Travel transaction will enable Ctrip to better service outbound travelers from mainland China because Ctrip's inventory and customer-service abilities in Hong Kong are limited.
Officials said Wing On Travel has extensive supplier relationships in Hong Kong, where it is a well-established brand.
In addition, officials said the Wing On Travel relationship will improve service to inbound travelers to the mainland because Ctrip will be better able to utilize Hong Kong as a hub.
Overall, officials added, the transaction will assist Ctrip in providing better service to middle- and high-end travelers in Greater China, including the mainland, Taiwan and Hong Kong, as well as other parts of Asia.
Min Fan, president and CEO of Ctrip says: "We anticipate that synergies will be developed in the near future."