TechCrunch is reporting that Kayak will announce tomorrow it has raised $200 million to purchase Sidestep for $180 million in cash from the VCs funding both organizations.

I wanted to pass on our congratulations to Steve Hafner and his team at Kayak, and the shareholders over at Sidestep, for this move. The deal appears to value the new entity slightly north of $450 million. TC is reporting the new entity will have combined revenues of $85 million - assuming 15% margins, this equates to a P/E of about 35, which seems reasonable for the emerging market leader in a growing industry. According to TC, the new company is also taking on some debt to improve its ROE for shareholders, a seemingly wise move as the company appears to have some healthy cash flow to service interest payments.

I think this deal is further market validation of the meta-search model that VibeAgent utilizes and which consumers and travel suppliers alike increasingly prefer (see PhoCusWright’s latest research showing OTA hotel market share declining to 40% of total online bookings in ‘06 at the expense of travel supplier sites selling direct).

With meta-search, consumers get to view prices from multiple sites all in one place, so they know they are getting the best available rates, and suppliers get to maintain control over customer acquisition while increasing their margins (they pay sites like Kayak a CPC or CPA fee to drive customers to their sites directly, which is much lower than selling inventory at deep discounts to Expedia and others).

Of course, market consolidation brings new opportunities, and we look forward to taking advantage of those opportunities for the benefits of our users and shareholders in the coming months and years.

Once again, congrats to Kayak and Sidestep. This is an exciting day in the industry.