Shares of Angie's List (ANGI - Get Report) and IAC/InterActive (IAC - Get Report) were surging during early morning trading on Tuesday after the companies confirmed an earlier report that U.S.-based website containing crowd-sourced reviews of local businesses would combine with Barry Diller's Home Advisor.
Angie's List shares were surging over 50% during early morning trading on Tuesday while IAC's shares were up about 15% following Monday evening's Dow Jones report of the sale of the platform to IAC.
IAC, owned by for Home Shopping Network founder Diller, will pay $8.50 a share, or more than $500 million, for Angie's List. IAC will combine Angie's List with its HomeAdvisor site and create a new publicly traded company.
According to Barclays analyst Ross Sandler, the deal values the combined business at $4.2 billion and unlocks "huge value 'hidden in plain sight' given IAC's conglomerate structure. The value is "well above" the Barclays' previous valuation of Home Advisor of $2 billion.
Barclay's raised its price target on IAC to $96 per share from $82 per share.
On Real Money, John Davenport and chartist Bruce Kamich dig into IAC's price strength and the challenge it creates for technical analysis. Get his insights with a free trial subscription to Real Money.
"This is now the 10th publicly traded company to emerge from what was one company, in 1995, with $48 million in sales and a market capitalization of $201 million - the beginning of IAC. Today, the equity value of the companies created is in excess of $43 billion, with a compounded annual return of 13.3 percent. While it's hard to predict the future, I think we'll just keep going," Diller said in a statement.
Jefferies analyst Brian Fitzgerald recently noted that IAC could be have more than 20% upside if it was broken up.
Monday's deal comes almost a year after the company turned down a $512 million, $5.75 per share, buyout offer from IAC. The bid of $8.50 a share is a 44% premium to Monday's closing price of $5.89, however, is 35% below its November 17, 2011, IPO price of $13, and is less than a third of the July 5, 2013, record closing price of $28.
"Since 1995, Angie's List has set the bar for enabling quality home services experiences for millions of consumers and service pros. I'm thrilled that IAC and HomeAdvisor share our vision for what's possible when it comes to the home services category's massive potential," said Angie Hicks, co-founder and CMO of Angie's List. "Together, we will relentlessly elevate home services experiences for an even broader base of customers."
The service has struggled with turnaround efforts and faced increased pressure from investors who pushed for the exploration of a sale.