InterActiveCorp chairman and chief executive officer Barry Diller today announced that the company's board of directors has approved a plan to separate IAC into two publicly traded companies. IAC Travel will spin off from its parent company under the name Expedia and will include the domestic and international operations associated with Expedia.com, Expedia Corporate Travel, and other IACT subsidiaries.
In a letter to shareholders, Diller explained that the businesses within IACT have grown "to the point where they now represent over 50 percent of IAC's earnings, and dwarf each of our other operations. Many of those, standing on their own, have real import and significance but are considered irrelevant in the current construct." The perception of IAC-parent company of Ticketmaster, Match.com and the Home Shopping Network among others-as a travel company "actually hinders the ability of our company to grow, both outside travel and inside of it."
Diller will stay on as chairman and CEO of IAC and will also serve as chairman and senior executive of Expedia. Dara Khosrowshahi, recently tapped as President and CEO of IAC Travel upon Erik Blachford's departure, will become CEO of Expedia.
In a conference call with investors and securities analysts today, Diller said the spinoff, contingent on final approval of transaction specifics by IAC's board of directors, the filing of registration statements with the Securities and Exchange Commission and other terms, will likely take place in the second quarter of 2005.
"Having done this from the first of the year, the people in the company will begin to get the energy that this reclassification is going to foster. That is why we've done it at this exact time. There was a lot of conversation internally that we should do this after the first of the year, but given that I do consider it to be inherently energizing, I wanted to, of course, get on with it," Diller said.
While Diller noted that Cendant's recent acquisition of competing online agency Orbitz did not serve as an impetus for IAC's decision, Khosrowshahi said "with some of the moves that Cendant has made and Travelocity, clearly we're going to anticipate more competition."
"We think that the expansion opportunities in travel are huge in scope and we will focus on organic growth and on gaining share as we've globally in the past. Certainly, this does present us with the opportunity to have a pure-play currency to make acquisitions to the extent that they make sense in the travel sector," Khosrowshahi said.
Diller also said he considered the impact this move may have on the company's ability to realize synergies among its subsidiaries. "We've got about 36 different arrangements between the travel companies and IAC. Each one of those is going to be a hard-wired commercial agreement and anything else we think is in the mutual interest of both companies we're going to do before this transaction goes out the door," he said. "Probably, there will be things that will be missed when you're not in one company. The walking distance is going to be very short and the atmosphere's going to be very good."
While Expedia Corporate Travel president Matt Hulett was unavailable for comment today, Diller described IAC's and Expedia's energy about the decision as "completely positive."
"We incubated travel, we were there at the very earliest period," he said. "It got so big that it had to come out and stand on its own for the good of itself and the good of the enterprise."