Diller keeps moving his chess pieces. IACI has agreed to sell its 5.4% interest in Vivendi Universal Entertainment for $5.4 billion.
Diller Stake in NBC Unit Is Being Sold
By GERALDINE FABRIKANT
Published: June 9, 2005
IAC/InteractiveCorp, controlled by Barry Diller, said yesterday that it had agreed to sell its 5.4 percent stake in Vivendi Universal Entertainment for about $3.4 billion, ending a fractious partnership and allowing Mr. Diller to focus on his Internet businesses.
Vivendi Universal Entertainment is part of NBC Universal, which is 80 percent owned by General Electric and 20 percent owned by Vivendi Universal. NBC Universal is putting up roughly $900 million to buy Mr. Diller's stake in the entertainment unit, which includes cable networks, Universal Pictures and other assets. The rest of the money is coming from Vivendi Universal, and the deal resolves its legal dispute with Mr. Diller over tax liability issues.
Barry Diller seems to be a big winner in his latest deal.
On a conference call with analysts, Mr. Diller sounded relieved and pleased. The deal is "done, done and done," he said. In a telephone interview, he added: "Three-way relationships are always complex and all the parties are better off" now that the deal has been made.
IAC is now focused on its Internet businesses, including Ticketmaster, Match.com and Evite.com. Last March, the company announced that it would purchase the Internet search engine Ask Jeeves for nearly $2 billion. The company plans to spin off its Internet travel units including Expedia and Hotels.com into a separate company.
On the conference call, Mr. Diller said his company might use its resources to buy back shares rather than making further acquisitions, which surprised and pleased some investors.
Over the last year, IAC's stock had fallen sharply as Expedia faced increasing competition from travel and hotel booking services. Yesterday, on news of the deal, IAC's stock jumped $1.17 a share, or nearly 5 percent, to close at $25.81. Stock in Vivendi was unchanged at $30.37 a share, while General Electric stock fell 4 cents, to close at $36.80.
Joe Bonner, who follows IAC for Argus Research, said yesterday's deal would help simplify IAC's structure. Vivendi Universal Entertainment "was a holding in entertainment that is no longer the company's main business," he said.
Mr. Bonner added that Mr. Diller's company "did not make a killing on the sale." IAC will post an after-tax gain of about $300 million after the deal.
The sale ends a contentious situation between IAC and Vivendi Universal. In 2002, Mr. Diller's company sold its stake in USA Network, Sci-Fi Channel and a TV production business to Vivendi, in a deal then valued at roughly $11.7 billion.
As part of that deal, Mr. Diller's company got back its own shares, valued at $7 billion, that Vivendi had held because of an earlier transaction; $1.6 billion in cash; and two types of preferred stock valued at $2.2 billion to $2.5 billion. The company also received the 5.4 percent stake in Vivendi Universal Entertainment, valued at about $1 billion.
Then, in 2004, General Electric's NBC unit acquired 80 percent of Vivendi Universal Entertainment. The deal was completed even though Mr. Diller appeared to have certain blocking rights to decisions involving the merged company. Vivendi sued Mr. Diller's company, claiming it was standing in the way of plans to complete the merger.
Mr. Diller also went to court against Vivendi when it refused to pay the taxes on the preferred stock. That case was pending in Delaware until IAC completed the sale of its stock yesterday.
Most of the tax burden falls to Vivendi because when NBC acquired Universal in 2004, it refused to assumed the liability for the preferred stock or any litigation connected to the stock.
As part of the agreement, IAC is getting about $865 million in cash for its Series A preferred stock. In exchange for its roughly $1.4 billion in Series B shares, IAC will get back 58.6 million shares of its stock worth $1.4 billion; it plans to retire those shares. In addition, Vivendi is putting up about $200 million in cash. NBC Universal will give IAC/Interactive $100 million in advertising time on NBC, and is putting about another $800 million in the deal.
As the three-way partnership ends, perhaps the biggest winner has been Mr. Diller. In 2002, he negotiated a deal with Vivendi Universal in which he personally received 1.5 percent of the entertainment business. Vivendi agreed to buy that stake for $275 million last year.
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