Media moguls Barry Diller and John Malone have settled their differences over the breakup of Diller's IAC/InterActiveCorp, paving the way for the Internet conglomerate to spin off four of its units.
Late Tuesday, IAC and its major shareholder, Malone's Liberty Media Corp., said they resolved a months-long legal skirmish.
"Now it's really over and that's great for both of us," IAC Chief Executive and Chairman Barry Diller said in a statement. Liberty Chairman Malone said in the same statement that he is pleased the company could resolve the issues with IAC.
Liberty is dropping an appeal it filed on May 7 disputing a March ruling by a Delaware judge who sided with Diller on the breakup plans.
Liberty also won't oppose the proposed single-tier spin-offs of IAC's HSN home shopping network, Ticketmaster, LendingTree.com and Interval time-share businesses. The remaining IAC business will still have a dual-share structure.
Liberty owns about 30 percent of IAC's equity and controls about 62 percent of the voting power due to a dual-share structure, but through an agreement between them, Diller has controlled Liberty's votes for years.
The spinoff plans, which were initially announced in November and approved by IAC directors, called for a single-tier voting structure at each of the spin-off companies _ thereby shrinking Liberty's voting power to about 30 percent in the split-off units.
Liberty had sued to reclaim the voting rights it claims Diller gave up when he went against Liberty's will in pushing for the breakup.
But in March a judge ruled against Liberty, saying it failed to prove Diller violated an agreement between them by pursuing the breakup plan. The judge also said Diller did not need to get Liberty's approval to split up IAC.
In a conference call last week, Liberty CEO Greg Maffei had alluded to the appeal's filing as having been done in time so Liberty could "potentially appeal if (IAC goes) forward on a basis we don't like."
As of Tuesday, IAC and Liberty said that as part of the resolution they have agreed on various arrangements regarding operations of the spun-off companies.
According to filings IAC made with the Securities and Exchange Commission on Tuesday regarding the spinoffs, Liberty is limited in its ability to increase its ownership stakes in the spinoffs, and can only hold up to 35 percent of the voting power in each.
Sanford C. Bernstein & Co. analyst Jeffrey Lindsay said in a phone interview that the cap on Liberty's ownership of the spinoffs is "largely a positive" for IAC.
"It sounds like a good face-saving outcome for liberty Media _ at least they've got something out of it. And it's probably a very good outcome for IAC management because they reached a settlement very quickly without giving away any significant value," he said.
Also according to the filings, as long as Liberty owns at least 20 percent of the voting power of a spun-off company's equity, it has the right to nominate up to 20 percent of its board members.
At most companies, 20 percent of the board equates to one or two seats, Lindsay said. He sees this move as a reasonable compromise.
Piper Jaffray analyst Aaron Kessler also sees the resolution as a positive.
"We don't think a lot was given up either way, but it kind of removes the barriers to getting (the spinoffs) done," he said.
Diller said in an earnings conference call at the end of April that IAC hopes to have the breakup finished in August.
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