In recent weeks, Orbitz Worldwide executives and attorneys have been working on a major transaction, according to a source who spoke on the condition of anonymity.
An Orbitz spokesperson says:
"The company's policy is not to comment on rumors and speculation about potential transactions and market activity."
Though it is unclear the scale and type of a likely deal, Tnooz has talked to a number of industry insiders, primarily analysts at funds that are significant shareholders or at investment banks that cover Orbitz and its competitors, to pull together a list of possible options for Orbitz.
For reference, Orbitz has been trading at about $8 a share, implying a market capitalization of about $900 million. It also owns the Ebookers, HotelClub and Cheaptickets brands.
One venture capitalist says that Orbitz has recently struggled to make a name for itself against larger consumer players and that the costs of reviving its consumer brand would be "astronomical."
Being taken private might be a good outcome for Orbitz, adds this VC. The pressure of public markets would be relaxed, which could give the company time to work through a long-term strategy.
Another industry insider agrees, mentioning Bain Capital's ownership of Apple Leisure Group, a packaged tour and resort company, by way of example. (Apple got a new CEO after Bain invested in the business, which was previously family-run, in 2012.)
In the boldest scenario, private equity might attempt to combine a de-listed Orbitz Worldwide with another online travel company facing similar headwinds in the face of industry consolidation by giants Expedia Inc and Priceline Inc.
Agreeing with this notion, another industry insider namechecks Fareportal, which owns Cheapoair -- a brand that has been gaining on Orbitz in the competition for third and fourth place rankings in share of US domestic air ticket sales.
With a partner, Orbitz might more easily take near-term share, as smaller, regional players get squeezed.
Orbitz might benefit by being folded into (merged/acquired) by a travel player with complementary skills.
One such company that has the cash to purchase Orbitz and might benefit most from it is China-based e-commerce giant Alibaba Group, according to two VCs.
Alibaba Group has recently made a series of investments in online travel platforms.
In October, Alibaba launched Alitrip.com, a new site that will sell travel and services. Acquiring the inventory and on-the-ground connections of Orbitz could help ramp up that project.
Alternatively, Australia's Flight Centre, another overseas player that appears to be looking to enter the American market, might be a long-shot potential acquiree, one industry insider points out.
Flight Centre has large cash reserves and little debt, putting it into an enviable position.
Groupon, the flash-deals leader, could afford a cash-and-stock acquisition of Orbitz, which is also located in Chicago. Many employees at all levels of the two companies have worked at both brands at one time or another, and the CEOs are friends with each other.
Groupon's fastest growing category of retail sales is travel, when you compare year-over-year growth (third quarter 2014 versus third quarter 2013). Groupon's 2014 gross travel billings were $908 million, up 69% year-over-year.
Despite that growth rate, Wunderlich Securities analyst Blake Harper, who would not participate in speculation, did point out that travel was still only 6% of Groupon's overall sales in 2014, according to the brokerage firm's estimates.
A year ago, Groupon and Expedia ended a joint marketing arrangement. Groupon currently sources its flash offerings through the Groupon Getaways sales team and its market picks inventory through the Expedia Affiliate Network.
Groupon could vaunt ahead of its e-commerce peers in travel supply by cherry-picking and re-packaging inventory from Orbitz. By owning Orbitz, Groupon could dictate the terms of the partnership -- something it couldn't do with Expedia.
Groupon has done growth through acquisition before, such as its purchase of Ticket Monster, which was the biggest contributor to growth in 2014, plus Blink, SideTour, ideeli, and other companies in the past few years.
On the other hand, Deutsche Bank's research report on Groupon's inaugural analyst day suggests the company is focusing on its transition from email (push) to mobile (pull) marketing and instituting a uniform playbook globally.
Expedia and Priceline
The consensus of experts Tnooz spoke with was that neither Expedia nor Priceline would want Orbitz because they instead prefer to invest in new markets and verticals. Evidence includes Expedia's recent purchase of Wotif and Priceline's recent purchase of OpenTable.
That said, Expedia's marketing partnership, in which in essence it took control of Travelocity's consumer site, demonstrates how either of the large legacy OTAs might find cost savings by adding Orbitz's sales and sourcing teams or its customer base, according to one investment bank analyst.
Of the two, Priceline is weaker in its domestic US market share, and thus could benefit more from picking up Orbitz. It's also the stronger in having the reserves to make an acquisition, say two industry insiders.
Industry insiders we spoke with dismissed the idea that TripAdvisor had the will or the resources to acquire Orbitz.
Yet it's worth noting that one of the most important initiatives for TripAdvisor is its Instant Booking service. The major online travel agencies, such as Expedia, Priceline, and Orbitz have hindered its growth by refusing to participate. Buying Orbitz or a similar small OTA might ramp up growth.
Orbitz is the private label provider to American Express's booking engine for its consumer site.
Orbitz's corporate solution hasn't performed to expectations, but the expertise and contacts of AmEx might help set it on the right course and scale up.
A merger is unlikely, said insiders we spoke with. But a less-ambitious deepening of ties between the two companies may be in the offing.
The broader picture
FBR Capital Markets analyst Jake Fuller declined to participate in the above speculation. But in an interview, he said:
"Broadly speaking, if Orbitz is considering its options, that would make some sense, because it is among the smaller players in an increasingly competitive landscape.
There's been a pickup of M&A activity in the online travel space that has led to consolidation. Plus the US and European market is maturing. That creates a difficult environment for smaller players to make inroads....
If, say, multiple companies are selling the same $100 a night room, the companies that can reach more consumers more cost-effectively through paid search and TV marketing will win more times than not.
Orbitz has definitely done a good job, especially with the use of new loyalty programs to increase repeat business and average transaction size, but it has a difficult task."