IAC Break-Up Rings Alarm Bells

The break-up of IAC/InterActive Corp., which met with an enthusiastic reception on Wall Street when it was announced Monday, is arousing concern over the fate of two smaller component companies as well as a possible clash with major shareholder Liberty Media. IAC's retail business, the Home Shopping Network [HSN], is believed to be worth upward of $2 billion, and Ticketmaster is estimated by analysts at around $3 billion. But the LendingTree loan exchange company and online time-share business Interval are each expected to be valued at less than $1 billion, turning them into small fry who attract neither the money of institutional investors nor the interest of research analysts. The spun-off companies could be acquired, but that might jeopardize their tax-free status. Meanwhile, IAC CEO Barry Diller could be heading for a showdown with Joe Malone, head of Liberty Media, which holds a 24.1% stake in IAC. The companies have an agreement giving Diller the right to vote Liberty Media's shares in any transaction. Malone is unhappy with the arrangement, and Diller might have to grant him concessions to lock in the deal. Two months ago, Diller offered Malone HSN -- which competes with Liberty Media's QVC -- in exchange for agreement to the rest of the break-up. Malone turned down HSN. Despite the difficulties, Diller maintains that "[t]his was the right thing to do, at the right time." IACI shares fell 2.3% in Tuesday trading.

Sources: New York Times, Business Week
Commentary: IAC to Split Into Five, Stock Climbs • Will IAC/Interactive's Break-Up Generate More Value?
Stocks to watch: IACI. Competitors: VVTV, GOOG, YHOO, MSFT. ETFs: FDN
Earnings call transcript: IAC/InterActiveCorp Q3 2007

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