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October 4, 1999

Sabre to Merge Travelocity With Preview; Inks $200m AOL Deal

By CBR Staff Writer

Travel services company Sabre Holdings Corp on Monday announced that it will acquire internet travel agency Preview Travel Inc. Sabre will combine its own internet subsidiary with Preview in a merger that effectively creates a clear market leader in online travel services. Terms of the deal call for Sabre to contribute the assets of plus $50m in cash in exchange for 70% ownership in the new company, which will be called Inc. Current Preview Travel stockholders will hold the remaining 30% of the combined entity.

At the close of the transaction, Preview Travel shares will be converted on a one-for-one basis into shares of the new company, which will trade under the symbol TVLY on the Nasdaq National Market. The merger has already been approved by both the Sabre and Preview Travel boards of directors, and is expected to close in the first quarter of 2000. Sabre said it had been committed to unlocking the value of for its shareholders and was looking to create a pure internet play.

The combined company will also benefit from a new, $200m five- year contract with America Online Inc, announced Monday, that makes the exclusive reservations engine for all travel-related services within the AOL service, AOL.Com, CompuServe, Digital City and Netscape.

AOL claims its travel channel is currently the number one travel destination on the web, with 7.3 million unique visitors in August. The agreement with Travelocity has a revenue sharing structure which will see AOL take part of commissions on travel sales and Travelocity pocket a portion of advertising revenue. In addition to the deal with AOL, Yahoo! Inc has extended its existing contract with Travelocity and has agreed to invest an undisclosed amount in the new entity.

Sabre said the merger creates a new powerhouse in the online travel market, which is currently the largest retail e-commerce category and is projected to grow from $7.8bn in 1999 to a hefty $32.1bn by 2004, according to Forrester Research Inc. The combined company will have more than 17 million registered memberships and more than 8 million unique monthly visitors – which it claims will make it at least 50% larger than any of its competitors.

In addition to its deals with AOL and Yahoo, the new company also boasts relationships with Lycos Inc, Go Network and Excite@Home Inc, among others. Combined travel sales for the two companies in the first half of this year totaled more than $467m – making it the third-largest e-commerce site after Inc and eBay Inc, and one of the top ten travel agencies overall.

By contrast, Microsoft Corp’s – which is set to be spun out from the software giant in a $75m initial public offering – has roughly 7 million members and claims to have handled about $700m in gross bookings since its launch in October 1996.

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When the deal closes, the combined business will be headquartered in Fort Worth, Texas, with a significant presence in San Francisco, where Preview is based. Terrell Jones, president of, will be the president and CEO of the new company, while Donald Carty, chairman of Sabre Inc, will serve as chairman of the board.

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