Match.com and Tinder are the best assets of IAC – and its biggest challenge

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The assistants of the IAC transaction are back at work.

Founded by Hollywood legend Barry Diller,
IAC

(ticker: IAC) has been doing business for over three decades. The company was founded in 1986 as a
Silver King Diffusion
.
He then became the owner of cable networks and renamed USA Networks. Unlike many TV actors, Diller and the US have embraced the Internet from an early age, to become USA Interactive and then InterActiveCorp. Today, it is only IAC.

IAC grew by 34% this year, driven by the solid performance of its 81% stake in
Match Group

(MTCH), which has online dating sites, including Match.com, OkCupid and Tinder.

The match is one of the biggest successes of IAC. The stock has almost doubled this year alone, thanks largely to the growing number of Tinder members. IAC sold a game of Match in an IPO in 2015 at $ 12. The title now stands at $ 85, and IAC's interest in Match is close to $ 19 billion. It represents more than 90% of the current market value of $ 21 billion of TSI.

But Match obscures the overall value of IAC. "The match has become so important and so successful and is such an important part of IAC that one has become the substitute for the other," said IAC CEO Joey. Wine.

Diller, 77, has ceded the role of general manager to Levin, a former business banker, in 2015. (Diller remains the company's chairman). Levin joined IAC in 2003 after spending two years at Credit Suisse in the dark days that followed the bursting of the Internet bubble. He worked as a junior staff member at Frank Quattrone, the banking technology guru.

This month, Levin and IAC unveiled a solution to the Match problem. The company plans to distribute Match's shares to its shareholders as part of a tax-free transaction. And IAC is considering a similar transfer of its 84% ​​stake in
ANGI Homeservices

(ANGI). This transaction is a $ 4.3 billion market capitalization activity that IAC created in 2017 by acquiring the publicly traded Angie list and merging it with HomeAdvisor, a company owned by IAC.

IAC's interests in Match and ANGI are now worth more than those of IAC itself. Therefore, the distribution of these shares should free up value. It is safe to say that the IAC heel has no negative value; the company has a billion dollars in cash, about $ 12 per share. Most analysts on the sellers side who follow IAC have performed a sum of the parties and the consensus is that IAC is currently worth $ 300 per share, or 20% more than the recent closing of $ 249.

Distributions would proceed as usual for IAC. In 2008, he simultaneously split his interests in four companies: Lending Tree (TREE), Ticketmaster, HSN and Interval Leisure Group.

In an interview at the company's headquarters designed by Frank Gehry in Manhattan, Levin notes that after the quadruple spin-offs of 2008, IAC was reduced to a mix of small businesses, including ServiceMagic (predecessor to ANGI) and Match, according to which "nobody believed in. "After the various distributions, he recalls, the stock of IAC stock was valued roughly at the amount of cash that the company had at the bank.

So what is it this time?

Without Match and ANGI, IAC would actually be an incubator again, with a handful of promising companies already generating considerable revenue, some of which profitable, and a series of younger bets. The best known is Vimeo, once considered a rival of YouTube, but is now more focused on providing the creators with tools for creating, storing and creating videos. In June, Vimeo generated $ 45.7 million in revenue, 16% more than the previous year's total.

And there is Dotdash, A web-based publisher that IAC bought at the New York Times for $ 300 million in 2012, at the time, when it was christened About.com. Original collection of barely generated content by users, Dotdash is in full swing, with a growing collection of practical and advice-based websites such as Investopedia, The Spruce (home design ideas), Byrdie (beauty tips), LivingWell well-being), Lifewire (technical advice) and The Balance (personal finance). In the second quarter, Dotdash generated revenue of $ 37.7 million, up 23%, with EBITDA of $ 8.4 million, or earnings before interest, taxes, depreciation and amortization.

The larger and more profitable segment of IAC, although growing at a slower pace, is creating applications for PCs and mobile devices. It generated US $ 132.9 million in revenue in June, down 7% from the same period in 2018, with adjusted EBITDA of $ 25.3 million.

IAC also owns CollegeHumor, The Daily Beast news site and BlueCrew, an application-based platform that allows blue-collar workers to open jobs. The company has also recently invested $ 250 million to become the biggest investor in Turo, the peer-to-peer car-sharing company formerly known as RelayRides.

All of these companies will not work and the batting average of IAC is less than 1,000. The purchase of Ask Jeeves for nearly $ 2 billion in 2005 was not a habit, and some sites have been closed. (Remember that the iWon online gaming platform? Probably not.) Nevertheless, IAC notes that its stock has posted an annualized return of 14% since controlling Diller in 1995, well before the S & P 500.

Given that stocks are trading at a price well below the sum of their coins, IAC seems to be the kind of deal that Diller would love.

Write to Eric J. Savitz at [email protected]