Expedia entered into a marketing agreement with Travelocity last year where Expedia provides content, inventory, customer service and technology to Travelocity. The latter agreed to focus on marketing the Travelocity brand as a channel for Expedia, and receives a performance-based marketing fees.
It seems to have been a good deal for Expedia which has captured the 16% share of the U.S. OTA market which Travelocity has.
It seems to make sense for Expedia to acquire the company but it may run into anti-monopoly, antitrust violation issues. Perhaps Expedia will be working to capitalize on the partnership.