Travelzoo Inc. (TZOO) 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) 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 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), the leading Web-search provider; Amazon.com Inc. (AMZN), 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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