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Stock Alert: Despegar Shares Gain 18% On Best Day Acquisition

Shares of Latin American online travel company, Despegar.com, Corp. (DESP) were up 18.57% on Tuesday on the news of its plan to buy Best Day Travel Group, one of the leading travel agencies in Mexico, for $136 million.

Following the news on Monday after the bell, the stock gapped up at $13.75 on Tuesday and closed at $14.75. The stock has been trading in a range of $9.52- $18.9 in the past one year.

The addition of Best Day, which had revenues of $140 million in 2019, is estimated to bring in a 25% increase in revenue for Despegar. The transaction is expected to close in the first half of 2020.

Despegar had some favorable tie-ups in the recent past.

Last week, the online travel company signed a 10-year deal with Tarjeta Naranja S.A. (Naranja), the leading credit card issuer in Argentina, and a subsidiary of Grupo Financiero Galicia S.A. Through this agreement, Despegar will provide a white-label online marketplace to Naranja to jointly sell Despegar's travel products and services to Naranja's customers.

A 10-year agreement with Industrial and Commercial Bank of China Limited to launch a co-branded credit card in Argentina in partnership with Mastercard, was inked in October last year. In the same month, the company had signed an API (Application-Programming Interface) connectivity deal with Ctrip, the leading Chinese online travel agency, to allow the integration of Despegar's direct accommodation offering in Latin America with Ctrip's platform.

Despegar is planning to launch a loyalty program in Argentina in this year in partnership with Mastercard to encourage more repeat purchases.

When the company reported third-quarter results in November last year, revenue had increased to $132 million from $121.2 million in the same quarter a year ago. However, the loss per share increased to $0.05 from $0.02 in the corresponding quarter last year.

Despegar is estimated to report its fourth-quarter earnings on March 5.

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