Barry Diller's Internet conglomerate IAC/InterActiveCorp said Wednesday that it is selling its stake in Vivendi Universal Entertainment for $3.4 billion, ridding the billionaire investor's company of a convoluted relationship as it gears up to enter the lucrative online search-engine market.

The deal turns over New York-based IAC's 5.4 percent stake in Paris-based Vivendi to NBC Universal Inc., which runs the television, theme parks and movie divisions owned by General Electric Co.

IAC and Vivendi also agreed to drop lawsuits that they had filed against each other in Delaware.

The truce ends an acrimonious alliance created when Diller -- the former head of Paramount Pictures and the Fox television network -- sold the USA network and other cable properties in 2002. (Diller is a board member of The Washington Post Co.)

Shedding Vivendi enables IAC to intensify its focus on a stable of popular Web sites that includes,, and

The company also owns the online travel agency, but it's preparing to spin off that site, and to make it easier for investors to grasp the value of its different holdings.

IAC is hoping to accelerate its growth later this year after it completes its pending $2 billion acquisition of Ask Jeeves Inc., an Oakland, Calif.-based company that runs the fifth-most-popular search on the Internet.

Diller wants to transform Ask Jeeves into a more formidable challenger to the two dominant search engines, Google Inc. and Yahoo Inc., and generate more advertising revenue.

IAC's decision to spin off its online travel sites and expand into Internet search is raising investor expectations, said analyst Martin Pyykkonen of Janco Partners Inc. "I don't think people are quite ready to declare Barry Diller a genius again, but people are feeling better about this stock than they have been," he said.

Under the terms of the deal announced Wednesday, IAC is getting back 56.6 million shares of its own stock that had been held by Vivendi, as well as $865 million from the sale of U.S. Treasury bonds that had secured its interests.

Vivendi also is paying an additional $235 million in cash while GE is chipping in $800 million, including $100 million of free advertising that IAC will be able to use on NBC or one of its other television networks.

"We feel very good about what we are paying and what we are getting," said General Electric spokesman David Frail.

IAC's shares rose $1.17 to close at $25.81. GE closed at $36.80, down four cents.

IAC is nearing completion of its acquisition of search-engine firm Ask Jeeves Inc., which it hopes to make competitive with Google and Yahoo.Barry Diller's IAC/InterActiveCorp is spinning off its travel sites but focusing on other Web interests.