Lastminute.com is buying Travelselect.com, a rival UK online travel agency, for £9m in new shares.

The acquisition will triple Lastminutes's UK flight volume, bulking up to annual UK revenues of £50m, the company says. Approx. 80 per cent of Travelselect's 200,000 annual air ticket sales are generated online. Also, the purchase will help Lastminute when introduces so-called "dynamic packaging" later this year i.e. it aggregates excess inventory from hotels and airlines for its cut-price holiday offers.

Travelselect is "immediately earnings enhancing", generating £3.3m of gross margin for the year to 31 Jan 2002. Lastminute says.

So what about the new share issue? Eighty per cent is subject to a lock-up provision of one year, so there is a risk of dumping on the market - and depressing the share price one year down the line. A new share issue dilutes the equity stake of the existing shareholders, but Lastminute.com does not appeared to have overpaid for a business which turns over nearly £40m a year and which catapults it into a significant position in the UK travel agency sector. ®