Diller to Spin Off IAC Travel Companies

Barry Diller, who created an Internet conglomerate by melding online ventures in businesses as diverse as travel, dating and party planning, has decided there’s value in specialization after all.

Diller said Tuesday that he planned to divide his IAC/InterActiveCorp into two companies: one that would combine travel firms, including Expedia and Hotels.com, and one for everything else.

In a letter to stockholders, Diller said the travel interests -- which now represent the bulk of IAC’s operating income -- needed to be spun off because they were overshadowing the rest of the company.

“We’ve come to discover that this perception actually hinders the ability of our company to grow, both outside travel and inside of it,” said Diller, IAC’s chairman and chief executive.

Analysts agreed.

“This is going to be good for visibility, good for valuation and should be much easier to run,” said Genia Turanova, a portfolio manager with Leeb Capital Management in New York. “Nobody knew how to view and value a company with that many moving parts.”

But investors got a better idea after Tuesday’s announcement. IAC’s shares rose $1.53, or 6%, to $27.41 on Nasdaq.

If the spinoff is approved by IAC’s shareholders and the Securities and Exchange Commission, the new travel company will take the name of its most famous brand, Expedia.

The rest of the properties, including HSN (formerly Home Shopping Network), Ticketmaster, Match.com, Evite and LendingTree, would retain the IAC name.

Diller would remain chairman of both companies and CEO of IAC. Dara Khosrowshahi, currently chief financial officer of IAC, would become CEO of Expedia.

The company said it intended to complete the transaction during the second quarter of 2005. The amount of stock that current IAC shareholders would get in each company has not been determined, an IAC executive said.

IAC made a profit of $167.4 million last year on $6.3 billion in sales. Of that revenue, $2.6 billion came from its travel-related businesses.

In a note to clients, analyst Safa Rashtchy of Piper Jaffray & Co. in San Francisco said he expected the travel holdings to grow at twice the rate of IAC’s other businesses. He called the new IAC “a case where the sum of the parts is greater than the whole.”

Diller’s 9-year-old company got into the travel business in 1999, when it acquired Hotel Reservations Network, now Hotels.com. The segment got a major boost in 2001 when IAC bought a controlling interest in Expedia.

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Associated Press was used in compiling this report.