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Barry Diller is making it easier for investors to know what they are sinking their money into when buying shares of his company, and Wall Street likes the clarity.
After Diller said on Monday that he would split his clunkily named IAC/InterActiveCorp into five separately traded companies, the stock rose 7.5%.
Goldman Sachs analyst Anthony Noto quickly removed his 10% “conglomerate discount” on the stock, thus his price target on IAC/InterActiveCorp shares rose from $32 to $33. The stock closed Thursday at $29.67.
Likewise, RBC Capital Markets analyst Jordan Rohan removed his conglomerate discount, which he had pegged at 15%, so his target was lifted to $32 from $30.
The five new companies are: IAC, which houses Ask.com, Match.com, CitySearch and others; Ticketmaster; HSN; LendingTree; and Interval International, which houses the travel assets.
With such varied assets all under the one IAC/InterActiveCorp umbrella, investors found it difficult to gauge growth potential, hence the aforementioned “conglomerate discount.”
Plus, why should investors interested in profiting from a fast-growing search engine like Ask.com be saddled with an online real estate firm like LendingTree? Or so goes the thinking.
Soon — probably by mid 2008 — investors can pick and choose their Diller-related investments and each of the five entities can use their own shares as currency for making acquisitions.
“The new structure should increase the simplicity of the investment decision and transparency of trends,” Noto said.
Rohan added that separate stocks could have the added benefit of more closely aligning employee performance with the success of the shares of the corresponding companies they’ll now work for.
Except, perhaps, if they work for LendingTree, a business severely hampered by the tumbling real estate market. Rohan, in fact, assigns a zero per-share valuation to the LendingTree business.
He thus gets to his $32 valuation by assigning the following per-share valuations to each of the businesses: $10 for Ticketmaster, $7 for HSN, $5 for Interval and $8 for IAC. Plus, as noted, an additional 15% for the removal of the conglomerate discount.
He warns, however: “We have seen some conglomerate unwindings not unlock value. For example, CBS and Viacom.”
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