August 21, 2008
Diller’s IAC Separating into 5 Units
By David Lieberman
NEW YORK -- IAC/InterActiveCorp will officially break itself into five distinct companies today, marking what could be one of the toughest challenges that CEO Barry Diller has faced.
After wowing Wall Street for decades with his dealmaking prowess and advocacy of corporate synergy, the Hollywood and Internet mogul finds himself struggling to regain investor confidence with a collection of mostly Web-based assets grappling with competitors and a weakening market. "He once had the Diller sizzle," says Alan Gould, media and entertainment analyst at Natixis Bleichroeder. "Now, you've got investors saying 'I don't want to touch anything'" that he runs.
IAC's stock has plummeted 55% the last 18 months; it fell 7 cents to $17.60 Wednesday.
The company hopes that investors will warm to the new arrangement creating publicly traded companies for HSN (formerly Home Shopping Network), Ticketmaster, time-share supplier Interval International and mortgage provider LendingTree. Diller will be chairman of Ticketmaster and continue to run IAC, which houses Internet properties, including Ask.com, Citysearch, Evite and Match.com.
He'll also control 60% of IAC's voting shares.
The new strategy is a pivot for the onetime chief of ABC, Paramount and Fox. He had long said that IAC's properties help each other. To get the benefits of synergy "in the scale and breadth we were after would have taken too long," Chief Financial Officer Thomas McInerney says. "We recalibrated that."
Shareholders will see more information about the separate companies, and their more than 60 brands, than they did when they were all under the same umbrella at IAC.
"No one could make heads or tails of it," says Vogel Capital Management CEO Harold Vogel. "You needed a playbook to figure out whether IAC was making or losing money."
Investors also can invest in operations they like -- and avoid the ones they don't. "When you're in a multibusiness construct, it's easy for one underperforming business to drag down the whole," McInerney says. "It becomes a 'yeah, but.' This is an attempt to get rid of the 'yeah, but.'"
Investors started to express their preferences on Aug. 12, when shares in the new units began to trade. Ticketmaster has already dropped 6% to $21.64. One of Ticketmaster's largest customers, concert giant Live Nation, plans to launch its own ticketing service at the end of this year. LendingTree, which has struggled through the housing crunch and credit crisis, is down 14% to $7.42.
And IAC fell 6%. That may be partly due to sales by index funds that invest based on the Standard and Poor's 500 index. Last week, S&P announced it was dropping IAC from the S&P 500, starting today. (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc. <>>