NEW YORK (The Deal) -- Angie's List (ANGI) has caught the attention of an activist shareholder as it struggles with its turnaround efforts, and a sale may be the best option for the review site, according to industry observers.
New York-based hedge fund TCS Capital Management revealed a 5.4% stake in the Indianapolis-based consumer review site in a 13D filing with the Securities and Exchange Commission on Wednesday.
TCS said it plans to have conversations with the company, which has about a $274 million market capitalization, about exploring a potential sale, the company's operations and the pending selection of its next CEO, among other matters, adding that Angie's List has multiple options to increase its market value.
"They have a great brand name. They do have a good base of subscribers," said an industry source who asked for anonymity, speaking of Angie's List. "What they don't have is -- they don't have any technology, and marketing is not very good."
Founded in 1995, Angie's List is a subscription-based website that connects consumers to service providers across various industries including home improvement and healthcare by providing customer reviews.
Any acquirer would have to see that there are positives despite the company's declining business, the source explained, adding that competition has increased with Amazon.com (AMZN), Google (GOOGL) and IAC/InterActiveCorp.'s (IACI) HomeAdvisor expanding their footprint in the local business review market.
The target's data would be key in a sale, the source said, adding that home improvement services provider HomeAdvisor could be a logical buyer of Angie's List, along with Home Depot (HD) and Lowe's (LOW).
"It would have to be somebody big who can absorb the company and say, I don't really need your revenues,'" this person said.
This source pointed to IAC's history of spinoffs -- with the initial public offering of online dating assets, the Match Group, being the latest -- and said the Internet conglomerate could look at HomeAdvisor as its next candidate to split off. HomeAdvisor has turned itself around well, and having Angie's List would significantly beef up its offerings, this person added.
Still, Angie's List would be negotiating from a position of weakness in a sale, the source said, adding that it's a "buyer's market" for this type of Internet assets. In October, Angie's List was reportedly exploring a sale.