Diller has prevailed in his legal tiff with Malone. This is probably round one of a ten round bout.
March 28, 2008
Judge Sides With Diller Over Malone
BY REUTERS
A Delaware court ruled in favor of the chief of IAC/InterActiveCorp Barry Diller on Friday in a legal dispute with the controlling shareholder Liberty Media Corporation, paving the way for him to proceed with a proposed spin-off of four company units.
Shares in IAC surged more than 8 percent on news of the decision.
In 78-page ruling, Delaware Chancery Court Judge Stephen Lamb upheld Mr. Diller’s long-standing proxy agreement that allows him to vote Liberty’s controlling interest in IAC, even if Liberty does not agree with his position.
The judge also acknowledged that IAC still had to work out the precise structure of the spin-offs, a process that could land the two sides back in court.
“In particular, the court rejects Liberty’s claim that the proposed single-tier spin-off gives rise to any right of consent on Liberty’s part,” Judge Lamb wrote. “It follows that the (Diller) proxy remains in effect.”
Liberty and its chairman, John C. Malone, had opposed a plan to structure the spun-off units with a single-class share structure that would dilute its control over them as separate entities. In a five-day trial earlier this month, it accused Mr. Diller of violating a long-standing proxy agreement between the sides with the proposal. He had sought Mr. Diller’s removal from the board along with six other directors.
Liberty owns about 30 percent of IAC, but retains 62 percent control through a class of super-voting shares. Mr. Diller has held the right to vote those shares under their proxy agreement.
“The simple, inescapable fact is that the IAC directors have not yet finally authorized the spin-off and have not even considered many of the essential terms of that transaction,” Judge Lamb wrote.
Liberty could still challenge those plans as they take shape, JudgeLamb said, adding the court would retain jurisdiction for such claims if they need to be resolved at a later date.
IAC shares rose as high as $22.20 in after-hours trading from they closed at $20.49 on the Nasdaq.
The two titans jabbed at each other during the testy week-long trial earlier this month. In his testimony, Mr. Malone said IAC’s results “have lagged seriously behind Nasdaq” and other indexes. He criticized Mr. Diller’s aggressive use of corporate aircraft, saying “he made it a fine art,” and took issue with the amount of management turnover at IAC. “I have always loved long-term, stable management building value,” he said.
During his own testimony, Mr. Diller dismissed Mr. Malone’s criticisms, arguing that a breakup would allow each of IAC’s “fresh, new little babies” to flourish.
Copyright 2008 The New York Times Company
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