Summary:

Two moves today for IAC (NSDQ: IACI) that most companies would separate but in this case decided to pair: Barry Diller has stepped aside as…

Two moves today for IAC (NSDQ: IACI) that most companies would separate but in this case decided to pair: Barry Diller has stepped aside as CEO, making way for Greg Blatt, president of Match.com, just as the company solves the conundrum of how to handle its relationship with John Malone’s Liberty Media (NSDQ: LINTA).

The Malone solution is the kind the long-term partners — and former legal combatants — adore: an “intended to be” tax-free swap of Liberty’s IAC holdings, representing about 60 percent of the voting power, for the subsidiary holding Evite and Gifts.com plus $220 million in cash. It will become part of the Liberty Interactive tracking group. In the same time frame, Diller swapped 4.3 million shares of his common IAC stock for the same number of Class B shares held by Liberty. That puts an end to an arrangement that gave Liberty the advantage in stock but Diller the right to control Liberty’s shares. It also ends a partnership that dates back to the ’90s. The details of the swap are in the release but the result is simple: it takes Liberty out of IAC.

The Malone solution leads IAC’s version of the news today, putting the exec change a distant second in some respects. I’m told the two moves aren’t related in any other way although from this vantage point, it’s hard to separate them. It’s also important to note that Diller, for all his talk of putting “a full time aggressive and aspirational executive in the CEO role,” isn’t relinquishing leadership of the company — or control. He retains the title of chairman, adds “Senior Executive” — and is now in a position to own about 41 percent of IAC’s voting power; he now holds about 34 percent, by far the largest voting stake. He can hit the higher number by exercising options over the next year that can be converted into Class B shares held by IAC, a right “granted” at the same time as these moves.

About that new CEO: Blatt, 42, joined IAC as general counsel in 2003 and took over at Match.com in early 2009. (That move, too, was paired with another corporate announcement — the sale of Match.com’s European business to Meetic.) Match.com and the other parts of that portfolio will be run by current management.

He joins the board with this promotion. Diller’s canned quote on the change:

“While I’m not going anywhere, IAC, with its operating businesses growing, large cash resources and virtually no debt, needs the kind of leadership that Greg Blatt can bring it in order to continue to grow and thrive many years into the future … I want this to be a long term holding for me and my family and I want this well capitalized and growing Company to be of enduring ambition and naming a new CEO is critical to that goal.”

Prior to IAC, where he was EVP, general counsel and a member of the Office of the Chairman for five-plus years, Blatt was at Martha Stewart Living Omnimedia (NYSE: MSO) in a similar role. In retrospect, the Match.com gig looks like Blatt’s chance to get some operational experience. Someone very familiar with the company describes him as “an inexperienced operator but very smart, determined.” More important, he is in sync with Diller’s plans for IAC. Another choice or setup might have signaled an exit strategy was being put into gear.

‘Nice valuation’: Needham’s Mark May says the Liberty-IAC swap “removes an overhang” for IAC given that Liberty had already marked the company as non-strategic and sold some of its Class A stock. He also pegs the deal as a plus on the valuation side, taking the $10 million or so in adjusted earning before taxes (EBIDTA) from the Evite/Gifts.com group and putting against a $28.70 price for IAC’s Class A and giving it a back-of-the-envelope 15x valuation. May also views the Blatt move as “positive.”

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