Billionaire Prince Alwaleed bin Talal, a nephew of Saudi Arabia’s King Fahd, announced Monday that he has agreed in principle to invest an additional $50 million (US$) in Priceline.com (Nasdaq: PCLN). The prince’s total investment in the online merchant will reach $100 million once the deal closes.
The forward contract calls for Priceline founder Jay S. Walker to sell the prince 2 million shares of Priceline.com common stock at $25 per share, a slight discount on Monday’s price of $27.19.
Monday’s deal represents the second time in as many months that Walker has sold off chunks of his company. In August, he agreed to sell 8 million shares to Vulcan Ventures and Liberty Media for $190 million in a deal structured similarly to the arrangement with Prince Alwaleed. Vulcan Ventures is an investment organization established by Microsoft co-founder Paul Allen, and Liberty Media owns media and Internet businesses in several countries.
The Norwalk, Connecticut-based Priceline.com allows users to name their own price on a variety of products, including airfare, hotel accommodations and mortgages.
Inside the Deal
Under the terms of the investment, the 43 year-old Prince Alwaleed is entitled take title to the Priceline.com shares no earlier than September 8, 2001, and no later than September 8, 2002.
Walker will retain voting control and record ownership of the shares until title to the shares is transferred. As compensation for the illiquidity of his Priceline.com investment, Prince Alwaleed will receive warrants from Walker to acquire an equity interest in Walker Digital Corporation.
As he did with the profit from the Liberty Media/Vulcan Ventures transaction, Walker plans to invest the after-tax proceeds of this transaction in future equity financing of the Priceline WebHouse Club, a privately held licensee of Priceline.com that allows users to name their own prices on a variety of retail items, including groceries and gasoline.
Other Princely Investments
Tied for fifth on Forbes’ “World’s Richest People List,” Prince Alwaleed, chairman of the Kingdom Holding Group, has a net worth of $20 billion, a fortune he created from well-timed investments of his inheritance in U.S. and European blue chip stocks.
The prince invested heavily in Citicorp in 1991, giving the company a sorely needed cash infusion of $590 million. That investment is now worth an estimated $5.8 billion.
Earlier this year, Prince Alwaleed announced $2 billion worth of investments in a variety of U.S. companies including Amazon, eBay, the Internet Capital Group, AOL, Compaq, Coca-Cola, McDonald’s, Walt Disney, and Ford Motor Corporation. The royal buying spree also included a $50 million investment in Priceline.com.
The prince reportedly studied more than 100 firms before selecting his “basket of Internet companies,” yet just months later, nearly half of his $300 million investment has been lost.
Despite the steep drop in the value of the prince’s Internet portfolio, however, the prince is known as a buy-and-hold investor, and there are many observers who believe his Internet stock selections have long-term potential.