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Expedia Inc. (EXPE - Analyst Report) recently completed its acquisition of a 61.6% equity stake in hotel search website Trivago for approximately €434 million (or $564 million) in cash. The company will also issue 875,200 shares of Expedia stock over five years.

Trivago is a German metasearch company that focuses on hotels. It compares more than 600,000 hotels across 140 booking sites in more than 30 countries and 23 languages. Trivago co-founders and management team will continue to operate independently from Germany.

The acquisition will allow Expedia to further boost its corporate travel portfolio and expand into the European online travel market. The deal will boost cost-efficiency measures and help Expedia pick up some market share. Additionally, management expects the acquisition to be accretive to adjusted earnings per share in 2013.

We believe that it is important for Expedia to expand internationally, especially since the strategy has worked so well for its main competitor Priceline.com (PCLN - Analyst Report), which owns Booking.com in Europe and Agoda.com in Asia.

Expedia is one of the leading online travel companies in the world. In the fourth quarter, the company’s earnings were 3 cents short of the Zacks Consensus Estimate although revenues exceeded by 4.7%, helped by a stronger travel market all over the world, contribution from the VIA acquisition and strategic expansion in Asia. We expect the business to continue on the growth path owing to the wide range of accommodation options that Expedia is now able to offer.

Currently, Expedia retains a Zacks Rank #3 (Hold). Other competitors that have been performing well and are worth considering include Bitauto Holdings Limited (BITA - Snapshot Report), Renren Inc. (RENN - Snapshot Report), and Priceline.com, all carrying a Zacks Rank #2 (Buy).

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