IAC Breakup Gets Court Approval

A recent judgment may have given IAC Chairman Barry Diller the green light to proceed with his proposed spin-off for the company’s Ticketmaster, HSN, Interval time-share business and LendingTree mortgage referral units, but the battles between IAC and majority shareholder Liberty Media could be far from over.

"Liberty has failed to demonstrate that Diller has breached or threatened to breach any contractual duty he owes to Liberty," Delaware Chancery Court Judge Stephen Lamb wrote in his decision, according to the Wall Street Journal. "In particular, the court rejects Liberty’s claim that the proposed … spin-off gives rise to any right of consent on Liberty’s part."

However, Lamb did not rule whether the spin-offs and proposed voting structure would breach the IAC board’s fiduciary duties to shareholders if the plans were approved, reportedly saying the issue wasn’t yet relevant.

"It is important to note that the Court deferred a decision on whether the IAC Board is complying with their fiduciary duties pending further action by the IAC Board," Liberty said in a statement. "Our primary objection to the spin-offs relates to the proposed use of a single-tier voting structure. We have never suggested that Liberty was otherwise opposed to the spin-offs.

"In any event, we expect that the IAC Board will heed its fiduciary duties and will act appropriately to ensure a fair and equitable outcome. Whether we take any further legal action to enforce these duties will depend on the course pursued by the IAC Board."

But Liberty could face a difficult time in court if it does pursue further action. Delaware courts generally rule in favor of a board if its members can prove they made their decisions in good faith, the WSJ said, and the tone of Lamb’s opinion was harsh toward Liberty’s case at times.

On top of Liberty’s objections to the plan, Diller’s spin-offs could face even bigger challenges given current market conditions.

While IAC shares rose 24 cents to $20.73 following the judgment, the company stock has dropped nearly 50 percent over the past 52 weeks.

Diller previously said that while some divisions within the company have faced challenges, the spin-offs would allow them to develop.

"The combination of over 60 brands makes it difficult for shareholders to appropriately value the company and for each brand to truly blossom," he said in a statement. "For that very reason, we are moving toward a spin-off that will create five companies that will each be more focused."

In that vein, Diller had begun courting private equity investment from firms including Elevation Partners (in which Bono is a partner) for Ticketmaster, sources reportedly close to the matter told the WSJ.

However as U2 recently signed a 12-year exclusive deal with Ticketmaster competitor Live Nation, it is unclear whether discussions will continue.