IAC/InterActiveCorp (Nasdaq:IACI), the internet conglomerate run by Barry Diller, engaged in a spinoff last week, giving shareholders ownership in four separately traded public companies. Shareholders also kept ownership in the original IAC/Interactive, which underwent a 2-for-1 reverse stock split. The stock has lagged the market and is down 40% year to date, and the spinoff may create more shareholder value as each new company can focus more on its core area, and investors can value the businesses more efficiently. (For more read Cashing In On Corporate Restructuring.)
The four new companies are Ticketmaster (Nasdaq:TKTM), The Home Shopping Network (Nasdaq:HSNI), Interval Leisure Group (Nasdaq:IILG) and LendingTree (Nasdaq:TREE).
The new IAC/Interactive contains its Media and Advertising businesses including Ask.com, Match.com, Fun Web Products, Citysearch and Evite. Another division called Emerging Businesses contains Shoebuy, ReserveAmerica, Pronto.com, Gifts.com, InstantAction.com, Connected Ventures, 23/6, VSL, RushmoreDrive.com and Life123.com. This stock will trade under the symbol Nasdaq:IACID until Sept 19, 2008, when trading will resume under the symbol IACI.
Ticketmaster is an online and offline ticketing services business, both domestically and internationally.
The Home Shopping Network comprises most of the former retail businesses of IAC/Interactive, including the network, HSN.com and the Cornerstone Brands portfolio of print catalogs. Cornerstone also operates several retail stores.
Interval Leisure Group is a provider of timeshare property to members, and also owns ResortQuest, which provides vacation rental and property management services.
LendingTree comprises businesses that offer lending and related products and services to individuals, including mortgages, home equity loans, automobile loans, and personal loans.
The spinoff had been held up due to litigation by Liberty Media Corporation (Nasdaq:LINTA) which is one of IAC/Interactive's largest shareholders. Liberty Media and various entities under its control, owned 26.3% of IAC/Interactive common stock and 100% of IAC/Interactive Class B common stock. If Liberty converted its Class B shares into regular common, the company would have owned approximately 33.0% of IAC's outstanding common stock. Despite this large ownership, however, the management of IAC/Interactive has an irrevocable proxy to vote the shares owned by Liberty.
Liberty had objected to the spinoff due to concern that its ownership would be diluted. The two parties settled out of court on May 13, 2008.
Assessing the Progeny
When IAC/InterActiveCorp released earnings for the second quarter of 2008 on July 30, 2008, the company provided a pro forma financial statement for the five companies as if they had been releasing results separately:
|Post Spinnoff Revenue
For Q2 2007 and 2008 (millions)
|Home Shopping Network||$695.80||$681.50||2.1%|
|Interval Leisure Group||$103.20||$ 85.90||20.1%|
An investor who held IAC/Interactive prior to the spinoff would receive 0.20 shares each of The Home Shopping Network, Interval Leisure Group, and Ticketmaster and 0.0333 shares of Tree.com. The investor will also receive 0.50 shares in the New IAC/Interactive for every old share due to the reverse stock split.
The spinoff of four entities may create more shareholder value for investors in IAC/Interactive as each of the new entities may be able to focus more on its core areas.
To learn more, read Using Breakup Value To Find Undervalued Companies.