It hurts to see IAC/InterActiveCorp's (Nasdaq: IACI) Barry Diller and Liberty Media's (Nasdaq: LCAPA) John Malone come to verbal blows. Weren't they BFFF? That's short for Best Fiscal Friends Forever.
Apparently not. Malone is now trying to oust Diller and his cronies from the IAC board, upset over the terms to dilute Liberty Media's controlling stake in the company through a proposed split of IAC into five distinct entities.
If you're hungry for the back story before the fisticuffs, Liberty Media has owned a stake in IAC for ages. Liberty's shares have more voting power than IAC's common stock, but that's never been a problem before. As part of the investment, Malone agreed to let Diller vote those shares accordingly. It had gone smoothly over the past dozen years. However, now IAC wants to turn Liberty's super-voting shares into common stock as part of the planned spinoffs.
It's easy to see why Malone is upset. It's also easy to see why Diller wants to level the playing field. IAC's spinoffs won't be as attractive to outsiders if Liberty Media reigns supreme on all fronts.
It's easy to see where this is heading. Now that there's bad blood between the parties, we may be past the point of compromise. There was a time when Malone probably would have accepted IAC's Home Shopping Network in exchange for a good chunk of Liberty Media's stake in IAC. Liberty Media, after all, owns HSN rival QVC. It would be a perfect fit.
Absent a harmonious resolution, IAC may find itself simply selling off its appendages. The timing is crummy. It will be hard to find a financial services giant hungry for LendingTree in this tricky loan market. Ticketmaster is a gem, but it's not as if troubled record labels such as Warner Music Group (NYSE: WMG) or Universal can afford to go on a spending spree. Wyndham (NYSE: WYN) would love to enhance its RCI timeshare exchange business by snapping up IAC's Interval International, and that may also be a compelling pursuit for travel portals like Expedia (Nasdaq: EXPE) and Priceline (Nasdaq: PCLN) to expand their offerings.
The problem with selling off assets in this case is that if proceeds go to buy back shares -- a noble pursuit in general -- that would only enhance Liberty Media's stake in the company.
In short, if things get any uglier between Diller and Malone, something has got to give. The easy way out would be for a larger third party to put them all out of their misery by acquiring IAC whole.
A private equity firm can bankroll the deal, then go about the piecemeal spinoffs. A struggling dot-com juggernaut like Yahoo! (Nasdaq: YHOO) can also jump in as a way to compensate for its lack of organic growth.
In the end, this is one battle that just got a whole lot more interesting. Yes, it hurts to see a pair of rich guys bicker, but it sure makes for good entertainment.
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