IACI is spinning off its travel related units:
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IAC/InterActive to Spin Off Expedia
Business - Reuters
By Jui Chakravorty
NEW YORK (Reuters) - IAC/InterActive Corp. (Nasdaq:IACI - news) plans to split itself in two by spinning off travel site Expedia.com and related businesses, saying the perception that its operations are exclusively travel-related is hindering growth.
IAC, dominated by its portfolio of Web travel sites, will spin off its travel-related assets into a new business named Expedia, but will maintain its retail units such as Web sites Ticketmaster.com and Match.com.
The company said the spin-off would take the form of a reclassification of IAC shares, with IAC shareholders receiving a proportionate amount of Expedia stock in a tax-free deal.
Shares of New York-based IAC were up $1.53, or 5.91 percent, at $27.41 at the close of trading on the Nasdaq.
"The breakup significantly reduces the (company's) complexity and allows the management teams to be more focused," Banc of America analyst Michael Savner wrote in a research note.
But Piper Jaffray analyst Safa Rashtchy told Reuters the spinoff would not make much difference to either Expedia or IAC.
"It doesn't change a whole lot in terms of their business operation," he said. "It will give a one-time boost to the IAC valuation today, because the sum of the two parts is greater than one."
Rashtchy said the stock could reach $30 in Tuesday trading.
NEW AND SIMPLER
Billionaire Chairman Barry Diller said the main purpose of the split was simplicity. "Our travel assets, to be understood, should be set apart from what some people said was the complexity of IAC," he said in a conference call with analysts.
IAC will retain its non-travel units, which include retailing businesses such as Home Shopping Network and HSN.com, financial services such as RealEstate.com and GetSmart.com, local and media services such as CitySearch and Evite, and teleservices -- direct sales and marketing.
"The result of our success in travel, and its present overweighting, is that IAC is viewed by the world as a travel company," Diller said. "We've come to discover that this perception actually hinders the ability of our company to grow, both outside travel and inside of it."
The new company will include Expedia, Hotwire.com and Hotels.com, and other travel-related businesses.
Diller will remain chairman and chief executive of IAC, while Expedia will be run by Diller as chairman and Dara Khosrowshahi as CEO. Diller's IAC stock options will be converted to options in both IAC and Expedia.
Splitting the company will allow a "closer alignment of employee performance and shareholder returns, which we believe will energize both sets of employees," Diller said in a letter to shareholders.
The spin-off, expected to be completed in the second quarter of 2005, comes at a time when rival travel companies are expanding through acquisitions.
Cendant Corp. (NYSE:CD - news), the No. 2 online travel agency after Expedia, bought travel Web site Orbitz for $1.25 billion in September and bought Britain's Ebookers Plc, owner of Europe's No. 2 travel site, for about $404.3 million earlier this month.
Online travel sites are competing fiercely for customers and fighting growing competition from new travel sites and hotel operators who prefer to advertise on their own Web sites.
(Additional reporting by Carolyn Koo) |
