Internet conglomerate

IAC/InterActiveCorp

(IACI)

announced plans Tuesday to split into two companies, one housing its high-margin online travel reservation businesses, the other its remaining electronic-commerce segment.

A new share class will be created to represent ownership in Expedia, which will comprise Expedia.com, Hotels.com, Hotwire and about 10 other travel-related companies. The combined revenue of the new company was $1.83 billion while its operating income before amortization was $549 million in the 12 months to Sept. 30.

The remaining IAC businesses, which include Ticketmaster, HSN, LendingTree and CitySearch, had revenue of $4.24 billion and operating income before amortization of $529 million in the same period. Barry Diller will remain chairman and CEO of IAC and become chairman of Expedia. Dara Khosrowshahi, who was previously named president and CEO of IAC Travel, will serve as CEO of Expedia.

In a letter to IAC shareholders, Diller said the point of the spinoff is to unlock the value in some of the smaller online travel companies that currently get lost in the larger IAC.

The travel companies "have had tremendous growth, to the point where they now represent over 50% of IAC's earnings, and dwarf each of our other operations," Diller said. "Many of those, standing on their own, have real import and significance but are considered irrelevant in the current construct."

The lesser-known travel companies in Expedia include TravelNow.com, Activity World, HotelDiscount.com, Condosaver.com, AllLuxuryHotels.com, Anyway.com, eLong, TV Travel Shop, Expedia Corporate Travel, Classic Custom Vacations and TripAdvisor.

Online travel has become an increasingly profitable and crowded business, with entrants spanning a spectrum as diverse as

Yahoo!

(YHOO)

,

Time Warner

(TWX)

and

Travelzoo

(TZOO) - Get Report

.

"I imagine that some hearing today's news may wonder whether the split of the companies is simply an elegant (or not so elegant) casting away of our travel businesses as the competition in that sector increases," Diller wrote. I can tell you my answer directly: it is not. And believing as strongly as I do in the prospects of both companies, my equity holdings will be treated the same as that of our shareholders and will be split proportionately between the two companies, with each company ultimately representing a very substantial portion of what I have worked long and hard to accumulate."