Barry Diller, the former Paramount studio chief, yesterday paid £1.1bn for a controlling stake in Expedia, the successful online travel agency.

Mr Diller's media group USA Networks is paying Microsoft $40 a share for the 75% stake it holds in Expedia. The online firm is the seventh largest travel agency in the US and one of the few business-to-consumer sites which has managed to break even.

Mr Diller said the acquisition would establish a bridgehead in the travel market. USA Networks yesterday also agreed to buy online cruise and package holiday operator National Leisure Group and announced plans to launch the USA Travel Channel on television.

"For some time we have believed travel to be a key building block in offering goods and services in interactive formats," he said.

The two acquisitions, the TV travel channel and USA Networks' existing stake in Hotel Reservations Network will be combined to create USA Travel Group, which is expected to generate $4bn of bookings this year. The group aims to exploit cross-media opportunities within the division and said bookings would grow by 40% next year. USA Network's other online properties include Ticketmaster.com, Citysearch, and HSN.com, the online version of Mr Diller's Home Shopping Network on TV.

Expedia was launched in 1996 as a unit of Microsoft and gained its own stock market listing in 1999. Microsoft will retain a stake of between 3-5% in Expedia. The acquisitions will expand USA Networks' share of retail transactions conducted over the internet and via TV in the US from 5% to 9%.