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Diller to Split His Conglomerate 5 Ways

Barry Diller has complained that the
Barry Diller has complained that the "conglomerate discount" has been a drag on IAC's stock price. The company's shares jumped 7.5 percent yesterday. (By Joe Cavaretta -- Associated Press)

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By Frank Ahrens
Washington Post Staff Writer
Tuesday, November 6, 2007

Barry Diller's IAC/InterActiveCorp, a conglomerate of more than 60 brands including Ticketmaster, Ask.com and the Home Shopping Network, is splitting into five publicly traded companies because, Diller said, the current structure is too complicated to be understood by Wall Street and investors.

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Diller, the former head of Paramount Studios and Fox television and a former top executive at Vivendi Universal, began accumulating the many companies and brands that make up IAC about 12 years ago.

Since then, the company's bloblike movement and makeup have befuddled investors, and the structure has allowed problems with one business -- such as the recent mortgage industry troubles at IAC's LendingTree.com -- to affect the rest of the company. Diller's solution, which he came up with over the summer, was to spin off compatible brands into five companies.

"It's always complex to tell the story" of IAC, Diller said in a conference call yesterday, saying it was impossible for him to describe his conglomerate in even one paragraph. "Then, you've always got something in trouble. If you're across that many sectors, there's always some little anchor banging away out there."

Most recently, the anchor has been LendingTree -- not so little -- which saw its third-quarter revenue dive 41 percent compared with the comparable period last year, because of the real estate slump and mortgage industry meltdown.

After the spinoff, scheduled for completion by the second quarter of 2008, a slimmed-down IAC will concentrate on the company's Internet and advertising elements, such as the Ask search engine; Evite, an online invitation service; and Match.com, a dating site.

Home Shopping Network will take IAC's retail operations, which include Smith and Noble and the Territory Ahead.

The new Ticketmaster will bundle all of IAC's ticketing businesses in the United States and abroad.

Interval International, a timeshare exchange network, will take IAC's online travel businesses.

And LendingTree will be grouped with RealEstate.com and other housing-oriented online products.

Like IAC, other conglomerates have found themselves trading at what Wall Street calls a "conglomerate discount." This means that investors and analysts typically believe that conglomerates are unwieldy, inefficient structures that impede, rather than unlock, the value of their component companies.

The spinoff is not the first for IAC. In 2005, Diller spun off Expedia.com and other travel businesses at $25 per share while retaining control of the company. Expedia stock dropped to less than $15 per share but has climbed since, closing yesterday at $30.80.


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