The deal broadens lastminute.com's hotel database, offering access to over 1,500 resort-based properties in countries such as Greece, Spain, the Canaries, Cyprus, Tunisia and Portugal.
The company has annual sales of £38.6m and a group profit of £5.3m. Med Hotels' UK staff of 112 people based in Woking and five in overseas offices will be kept on.
Brand names are being retained because, according to a lastminute.com spokeswoman, they have good brand collateral and a strong relationship with suppliers.
John Kent, chief executive of Med Hotels, will stay with the group, leading the resort hotel contracting teams. He will report to Simon Terry, head of global product at lastminute.com.
Brent Hoberman, chief executive of lastminute.com, said: "The combination adds significantly to our overall scale in this important product category and improves our consumer hotel offering. In addition the acquisition will further leverage the holiday autos trade relationships, especially in the UK and Germany."
The deal is worth £8m in cash and 2.9m new shares in Lastminute, with the management receiving 1.8m of those shares subject to a lock-up period of one year.
Lastminute.com will pay a further amount depending on the financial performance of Med Hotels for the years to October 31 2003, 2004 and 2005. This additional sum has been capped to a maximum of £6.5m and may be paid in either new shares or in cash, at the discretion of lastminute.com.
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