SHANGHAI (AFP/REUTERS) - China's largest online travel agency Ctrip will buy British flight search app Skyscanner for US$1.74 billion (S$2.5 billion), the companies said, as it steps up its overseas ambitions.

The travel service provider will pay £1.4 billion (S$2.5 billion) mainly cash for the Edinburgh-based firm, they said in separate statements late Wednesday.

NASDAQ-listed Ctrip, partly owned by Chinese search giant Baidu, provides online booking for airline and railway tickets as well as hotels, and describes itself as China's largest travel company.

It generated more than 350 billion yuan (S$72.5 billion) in gross merchandise value last year, the firm said on its website, referring to a measure of online sales.

Skyscanner, which was reported to be exploring a sale or an initial public offering, was valued at US$1.6 billion in a funding round in January, when it raised £128 million from a group of investors that included Malaysia's sovereign fund, Khazanah Nasional and Yahoo Japan Corp.

Ctrip said it expected to complete the deal by the end of 2016. The firm, which has backing from Chinese Internet giant Baidu Inc and US travel company Priceline, topped up its war-chest for acquisitions earlier this year when it raised over US$2 billion through shares and convertible notes.

Mr Gareth Williams, chief executive of Skyscanner, said: "Ctrip is the clear market leader in China and a company we can learn a huge amount from." The acquisition by Ctrip took Skyscanner "one step closer to our goal of making travel search as simple as possible for travellers around the world", he added.

Skyscanner provides similar services to Ctrip and has 60 million monthly active users, mainly in Europe.

Ctrip co-founder and executive chairman Liang Jianzhang said: "This acquisition will strengthen long-term growth drivers for both companies. Skyscanner will complement our positioning at a global scale." Skyscanner will remain operationally independent with its current management team, the statements said.

Shanghai-based Ctrip merged with another major Chinese online agency Qunar last year to create the country's biggest Internet travel service.

The deal gave Baidu, which controlled Qunar, a 25 per cent stake in Ctrip.

The Skyscanner deal, already approved by boards of both firms, is still subject to customary closing conditions and is expected to be completed by the end of 2016.

Ctrip's shares were up 9.2 per cent at $44.75 in extended trading.