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IAC Trial Faces Decision
A Delaware judge is set to rule whether IAC chairman Barry Diller violated the bylaws of one of the company’s largest shareholders, Liberty Media, in proposing spin-offs and a new voting structure for IAC’s Ticketmaster, HSN, Interval time-share business and LendingTree mortgage referral units last November.
When Liberty Media, which owns 30 percent of IAC and a 62 percent voting interest in the company, balked at the IAC head’s plans, Diller filed suit in January.
However, Liberty was quick to file a countersuit at the time, calling Diller’s actions a "corporate coup."
"If consummated, the spin-off will free him from the watchful eye of a controlling stockholder, permit him to liquidate a large portion of his interest in IAC without losing control over the company’s marquee assets, and preserve his legacy," Liberty’s suit said.
IAC has argued in court that the spin-offs are in fact for the best interests of shareholders, and that the original proposal for them came not from Diller, but from IAC vice chairman Victor Kaufman, according to the Wall Street Journal.
Kaufman testified that IAC executives had discussed various spin-off proposals as well as the possibility of swapping one core business with Liberty in exchange for the company’s stake in IAC, the paper said. However, negotiations reportedly went south when relations between Diller and Liberty CEO Gregory Maffei soured.
That could be attributed, in part, to IAC’s sinking stocks, which have dropped nearly 50 percent over the past 52 weeks.
Liberty Chairman John Malone testified in court that IAC shares "have lagged behind Nasdaq," and that Diller has stumbled in building a strong management team at IAC, according to the New York Times.
And, at times, Diller’s intentions for IAC have appeared uncertain, an IAC executive reportedly close to the matters told the paper.
"At its core, it is a mergers-and-acquisitions deal shop," the executive said. "IAC does not have a mission as to why you want it all to be together. Its mission is nothing more than doing what is interesting to Barry."
Unfortunately, what interests Diller hasn’t always proved fruitful.
IAC’s Ticketmaster was lobbied in 2002 to purchase the ticketing resale marketplace StubHub (then known as LiquidSeats) for $20 million, the paper reported, but instead focused on creating its own TicketExchange service, later purchasing TicketsNow for $265 million. StubHub was purchased by eBay last year for $310 million.
Diller admitted that IAC has faced some rough patches in a statement to the Times.
"The company continues to perform well at the operating level," he said. "While there are many bright spots in the company, I am the first to recognize there are challenges. The combination of over 60 brands makes it difficult for shareholders to appropriately value the company and for each brand to truly blossom. For that very reason, we are moving toward a spin-off that will create five companies that will each be more focused."
Chancery Court Judge Stephen Lambis is expected to issue a ruling by March 28th.