IAC to Split Into 5 Units

NEW YORK IAC/InterActiveCorp, the Internet conglomerate run by Barry Diller, said Monday it would break itself into five publicly traded businesses—an indication that the media mogul’s plan to build a multimedia empire has failed.

The announcement drove IAC’s shares up more than 7 percent, as Diller explained the split would mean the independent businesses would answer more directly to shareholders rather than being shielded by IAC.

“In a sense, I felt we were running a false game,” Diller said as he made the announcement Monday, referring to IAC’s current structure that dictates that it manage about 60 brands in a diverse array of businesses.

The New York-based company plans to spin off its HSN home shopping network, Ticketmaster ticketing service, Interval time-share business and LendingTree mortgage referral units. Roughly 30 Web-only brands—including the Ask.com search engine, Match.com, Evite, Citysearch and Excite—would remain as part of IAC.

Diller also announced that IAC had reached a renewed deal with Google for the search giant to continue as its advertising-listings provider for another five years. Diller estimated that deal’s more favorable terms would bring in more than $3.5 billion in revenue, a key reason the company felt the Internet-only part of the business was ready to operate on its own.

“It’s enormously significant for this company,” Diller said of the Google deal. A Google rep declined to comment.

The new IAC will stay in its Frank Gehry-designed building on the West Side of Manhattan, and Diller will continue as CEO. He said he would have a role in one or two of the spun off companies, but would not say which ones.

“While we’ve created a lot of value, I’ve always believed our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors,” he said.

Diller said in addition to confusion about IAC’s many businesses, the variety of the divisions left it vulnerable to investor anxiety if any one of them performed poorly, such as LendingTree did in the most recent quarter.

“I started to think about the fact of my frustration, of others’ frustration, about shareholders frustration about ever getting a valuation even close to what the value of the entities was,” Diller said.

One of IAC’s biggest shareholders, and no doubt a source of Diller’s worry, is John Malone’s Liberty Media Corp. Analysts had hoped Liberty Media would buy HSN using its IAC shares, a hope that has been helping prop up IAC’s stock price, said Sanford C. Bernstein analyst Jeffrey Lindsay, who covers the Internet sector. “It’s a very good deal, it’s very clever. I think they’ve reinvigorated the company to a large extent,” Lindsay said.

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