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Expedia sells stake in Chinese travel service

Expedia's ties to eLong date back to 2004, when its parent company, IAC/InteractiveCorp, bought 30% of the company.

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Expedia sold its entire stake in eLong, a Chinese travel service, to a group of businesses based in China for roughly US $671 million.

The news sent shares of the online travel company up more than 5% in midday trading Friday.

Before the market opened, Bellevue, Washington-based Expedia said that it had sold its 62.4% share in eLong to a group that includes Ctrip.com International Ltd., Keystone Lodgings Holdings Ltd., Plateno Group Ltd. and Luxuriant Holdings Ltd. The company said the transaction closed Friday.

Separately, Shanghai-based Ctrip, said it had acquired a 37.6% stake in eLong for roughly $400 million.

Expedia's ties to eLong date back to 2004, when its parent company, IAC/InteractiveCorp, bought 30% of the company.

IAC spun off Expedia with eLong the next year, and Expedia later acquired a larger share of eLong in an attempt to profit from a growing appetite for travel in China.

But eLong eventually became a drag on Expedia's profits.

In a note to clients, Scott Devitt, an analyst at Stifel Nicolaus & Co., said eLong took a US $33.3 million cut out of Expedia's first-quarter adjusted earnings before expenses. He estimates the sale of eLong should boost

Expedia's adjusted earnings before expenses by US $85 million this year.

Devitt called the move "a positive step for Expedia, as the eLong subsidiary was facing intensifying competitive pressure and increasing investments to maintain bookings growth."

Until the announcement on Friday, Expedia had been more of a buyer than a seller. In February, it announced plans to buy Orbitz, a rival travel site, for approximately US $1.33 billion.

In January, it announced an agreement to buy Travelocity for US $280 million, months after saying that it would spend US $658 million on Australia's Wotif.com Holdings Ltd. Wotif gives Expedia a broader entry into the Asia-Pacific region.

Expedia's stock was up US $5.84 to US $111.73 in midday Friday after rising to a 52-week high of US $115 earlier in the session. Over the past year, its shares have traded as low as US $70.19, according to the data provider FactSet.

Ctrip's US-listed depository shares soared US $9.52, or 13%, to US $81.49. 

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