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Summary:

IAC (NSDQ: IACI) is planning to split itself into five publicly traded companies. The new business will be: IAC (Ask.com, CitySearch, et. al…

IAC (NSDQ: IACI) is planning to split itself into five publicly traded companies. The new business will be: IAC (Ask.com, CitySearch, et. al.), HSN, TicketMaster, Interval International (vacations), and LendingTree. The move is expected to close in the second or third quarter of 2008. There will be an 11:00 AM webcast to discuss the plan. Release.

In the release, CEO and chairman Barry Diller gets into the rationale: “We’ve been a complex enterprise almost from the very beginning 12 years ago, with hundreds of transactions over those years. And while we’ve created a lot of value, I’ve always believed our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors.” He added that the internet business no longer need the cash flow from the transactional businesses to stand up.

In terms of management, Diller will stay on at IAC, while Mindy Grossman, Sean Moriarty, CD Davies and Craig Nash will serve as CEOs of HSN, Ticketmaster, LendingTree and Interval respectively.

Staci adds: Diller has been under increasing pressure, particularly by majority shareholder Liberty Media, (NSDQ: LINTA) to make IAC pay off. Liberty’s John Malone sent a major volley over the bow 10 days ago in the WSJ, when he told a reporter: “There was a time when there was, I think, a 20 percent Barry premium (on Wall Street) … Today you could argue there is a Barry discount.” Malone, who gave Diller a lifetime/until retirement proxy for Liberty Media’s voting rights in what became IAC, said he personally would still “bet on Barry” but that Liberty CEO Greg Maffei was unhappy with the setup: “There is not quite as much love for Barry on average (at Liberty) … Greg has made it clear that he isn’t as enchanted with Barry as I am.”

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  1. IAC's business is not hard to understand. The discount on the stock exists because no one trusts Barry Diller not to dilute shareholders by continuously granting himself option grants. Additionally, no one trusts Barry Diller not to divest the company of very valuable assets/divisions at a discount in exchange for John Malone and Liberty Media's controlling interest in the company (similar to News Corp exchanging its 38% stake in DirecTV for Liberty's 18% voting stake in News Corp.) Diller's objectives for absolute voting control and shareholder's objectives for obtaining value for the company's assets are diametrically opposed. Look at Berkshire Hathaway: Would Warren Buffett decide to split Berkshire up for reasons similar to Diller's? If you have credibility, instead of a mouthful of sentences in explaining the businesses, the only thing a CEO needs to state is profits and the market will take it from there. Diller is focused on maintaining control like a majority owner for the sake of his vanity, when in reality he is a minority shareholder that has shaky control based on voting rights on Liberty Media's ownership.

  2. John C. Smith Monday, November 5, 2007

    Totally agree.

    Diller may have been a talented entertainment / programming exec back in the day — but he's achieved very little since, particularly online.

    What he has done, he's engineered through self-dealing (per the above comment) and astute up-trading from the basis of Silver King, which John Malone basically gave him 10-15 yrs ago after QVC's failed takeover of Paramount.

    Which is not to say Diller's not smart — he just hasn't built much value. And he certainly hasn't launched/created great products, or done anything otherwise that is innovative.

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