Angie's List Gets the Buyout Offer from IAC That Activist Wanted
Amid pressure from an activist investor, Angie's List (ANGI) - Get Report has received a buyout proposal from Barry Diller's IAC/InterActiveCorp (IACI) that values the consumer review site at over $500 million.
IAC announced Wednesday after the markets closed that it has proposed to acquire Angie's List for $8.75 per share. Based on the 58.52 million outstanding shares of the target, IAC's bid is worth $512 million.
The Internet company is seeking to purchase the Indianapolis-based target in an all-cash deal but said it is also open to considering a combination of Angie's List with IAC's HomeAdvisor via a tax-free reorganization, which would allow Angie's List to remain public.
Angie's List shot up nearly 12% Thursday morning to $8.85 per share, giving the company a $517.9 million market capitalization. Shares of IAC went down about 1.2% to $64.56 a piece, assigning the suitor a $5.4 billion market cap.
The bid for the Indianapolis-based consumer review site from IAC comes about five months after activist shareholder TCS Capital Management launched its campaign.
TCS Capital Management, which initially revealed its 5.4% stake in July, pushed for the combination between the target and IAC's HomeAdvisor last month.
TCS Capital Management's president, Eric Semler, told The Deal in October that Angie's List could remain public in a tax-free reogranization with HomeAdvisor that would involve a stock-for-stock exchange, and that the target's shares could at least double or triple after the tie-up.
Semler said via phone Thursday that he is pleased that IAC has made the proposal.
"We love the idea of those two companies combining and keeping Angie's public," he said of HomeAdvisor and IAC, adding that there is a potential for a "very high profitability, multiples story."
He further said the Angie's List board has fiduciary obligations to run a robust process to investigate all available opportunities to achieve high value for investors.
"I'm hopeful that they will pursue their obligations to get the highest value for Angie's shareholders. And I think that at this point, that can be achieved only through a transaction and not staying independent," Semler said. "There's too much interest, including IAC."
He added that Angie's List generates $350 million of revenue and similar business models have at least 30% to 40% in EBITDA margins.
"On that basis, the target should make at least $90 million to $100 million of EBITDA and the question is what multiple would a buyer pay for that. Typically 12 times EBITDA, which equates to a $20 stock," Semler argued.
A source familiar with the situation who asked for anonymity said the $8.75-per-share offer is unlikely Diller's "final and best offer."
"He put an offer, which by definition will cause the company to deal with it," this source said, adding that the $512 million proposal likely undervalues Angie's List.
Another source familiar with the situation who requested to remain anonymous said there are other strategics interested in pursuing a transaction with Angie's List.
The Deal previously identified HomeAdvisor as a likely suitor for Angie's List, along with Yelp (YELP) - Get Report , Comcast (CMCSA) - Get Report and eBay (EBAY) - Get Report and Japan's Rakuten.
Meanwhile, IAC CEO Joey Levin wrote in a letter to the Angie's List board Wednesday that the combination has a "compelling strategic rationale."
"We were disappointed to hear that the board is not interested in further engaging with us regarding a strategic transaction involving Angie's List," Levin wrote.
While IAC would have preferred to hold confidential discussions, he said it has been unable to develop any meaningful dialogue for "many months," unveiling that it sent a letter to the board on Oct. 5 expressing its interest in M&A talks and met to propose a transaction on Oct. 23.
"I assure you that this transaction has the highest priority for IAC," he said.
Levin further touted IAC's ability to swiftly carry out a transaction, explaining that the $8.75-per-share range is greater than 18 times the midpoint of the target's forecasted EBITDA range for the year.
In response, Angie's List confirmed late Wednesday that it has received an unsolicited proposal from IAC. With its financial and legal advisers, the board will carefully review and evaluate the proposal, the company said.
Founded in 1995, Angie's List is a subscription-based website that connects consumers to service providers across industries by providing customer reviews.
As it has struggled with beefing up its technology and marketing offerings, the company has seen its growth slow in recent years. In September, Angie's List named former Best Buy (BBY) - Get Report executive Scott Durchslag as its CEO.
Officials with IAC could not immediately be reached for comment Thursday. Those with Angie's List declined to comment.
—David Marcus contributed to this report