IAC's Diller: Path's Clear for Spinoffs
SAN FRANCISCO -- Chief Executive Barry Diller of
IAC/InterActive Corp.
(IACI)
said he sees no more obstacles to impede the spin-offs of the Internet conglomerate.
In a conference call on Wednesday, Diller told analysts that IAC's board of directors had met on Monday and would likely meet one or two more times before moving ahead with plans to break up the company into five publicly-traded entities, to be completed by August.
"There's nothing in our process that will cause a delay," Diller said.
He added that the uncertainty surrounding a lawsuit filed by
Liberty Media
(LINTA)
has been lifted since a judge
of IAC last month.
Liberty, which owns a 30% stake in the company and about 62% of its voting control through a second class of super-voting shares, had accused Diller and IAC's board of trying to dilute that stake by proposing the break-up and giving each spin-off a single-tier voting structure.
The judge agreed with IAC that it did not need Liberty's approval for the spin-offs. But he left open the possibility that Liberty could come back to sue IAC if its board agreed to restructure the company's voting power.
On Wednesday, Diller seemed confident that the spin-offs would go forward. He also minimized the chances of a much-discussed swap between one of IAC's businesses -- likely the Home Shopping Network -- and Liberty's stake.
"I think it's very unlikely one will occur," he said.
Diller's comments came as IAC reported its first-quarter earnings, which were in line with Wall Street estimates.
The company reported a first-quarter profit of $52.8 million, or 18 cents a share, compared with $60.8 million, or 20 cents a share, a year ago. Adjusted for certain items, earnings totaled $87.2 million, or 30 cents a share, compared with $96.9 million, or 31 cents a share.
Revenue for IAC grew to $1.6 billion from $1.49 billion a year ago, beating Wall Street expectations of $1.53 billion.
Shares of IAC were up 3.5%, or 72 cents, to $21.18 in afternoon trading.
Diller said IAC's first-quarter results were all the more reason why the spin-offs should occur, pointing out that some of the company's divisions were being overshadowed by others.
Among the ones facing difficulties is Lending Tree, which posted a 38% decline in revenue growth in the first quarter vs. a year ago. But Diller and Chief Financial Officer Thomas McInerney were quick to note that the division had narrowed its losses compared to previous quarters.
Ticketmaster posted a 15% revenue climb in the first quarter, mostly because of the acquisition of Paciolan and TicketsNow, which are meant to offset the division's expected loss in revenue once the contract with its largest client, Live Nation, expires at the end of the year.
The company said profits were adversely impacted by non-reoccurring items that benefitted the prior year, as well as losses associated with acquisitions and investments, particularly in Germany and China.
Other divisions showed some strength. Interval, which sells vacation time shares, increased first-quarter revenue by 34%. The Home Shopping Network grew by 9%, excluding America's Stores, which discontinued operations in April of 2007.
The remaining businesses, which would make up the new IAC under a spin-off scenario and include Ask.com, Evite, Match.com and Citysearch, posted a 22% increase in revenue. Ask.com benefitted from the renewal of its agreement with
(GOOG) - Get Report
to outsource its online ads.
Sanford Bernstein analyst Jeffrey Lindsay noted in his latest research that IAC's results managed to overcome expectations for a bad quarter, posting a mediocre quarter instead.
"Management is pulling out all the stops to drive revenue growth, discounting significantly where necessary to maintain momentum of the proposed 5-part spin-out plan," he said.
Goldman Sachs analyst Jennifer Watson wrote in her research that the company's first-quarter results would have a "relatively limited impact on IAC shares given that most investors are awaiting more details about the capital structure and financial characteristics of the five independent segments what will be spun off in the near future."