One of the harsh realities of the dating world is that breakups happen. They are sometimes painful, long in coming, and usually necessary. If done right, they can end up being cathartic and beneficial to both parties.
The same can be said for the business world, and one split that has been a long time coming is the separation of Tinder owner Match Group (MTCH) and its corporate parent, IAC (IAC).
The companies announced in a press release Thursday that they have reached a definitive agreement to split off IAC's stake in Match Group from the rest of its businesses, a deal that has been approved by the boards of both companies. The transaction is expected to close in the second quarter of 2020.
Investors are celebrating the divorce, with the stocks of both companies gaining more than 9% in early trading Thursday, though they are recently trading up about 7%.
An equitable split
Match Group is best known for its online dating apps, including Tinder, Match, OkCupid, Hinge, PlentyOfFish, and OurTime. The deal will eliminate Match Group's dual-class stock structure (which is always a positive for shareholders) while providing one share of stock and $3 per share in cash to Match Group investors. The deal will be tax-free, with the exception of the cash component. Shareholders can elect to receive either the cash or additional shares of Match Group stock. IAC shareholders will also receive a commensurate ownership of Match Group.
"We've grown up tremendously over the last 20 years as part of IAC, from an innovator in a nascent category to a global leader in a fast-growing market with millions of users all over the world," said Mandy Ginsberg, CEO of Match Group. "Match Group is in an incredibly strong position as we enter this transaction, and we are ready for the next chapter of the company's journey."
Barry Diller, chairman of IAC, said: "We've long said IAC is the 'anti-conglomerate' -- we're not empire builders. We've always separated out our businesses as they've grown in scale and maturity, and soon Match Group, as the seventh spinoff, will join an impressive group of IAC progeny collectively worth $58 billion today."
IAC telegraphed the split back August when the company announced it was considering the move. By October, IAC submitted a proposal to Match Group's board of directors suggesting the spinoff.
The company's business model has long been to buy stakes in smaller businesses, improve their operations, and sell them at a substantial gain. IAC bought Match in 1999 and took the company public in 2015. Since its debut, shares in the dating app specialist have gained more than 400%, making it one of the best-performing consumer discretionary stocks over the past several years.
By selling its stake in Match, IAC gains much-needed capital to embark on its next moneymaking venture. Earlier this year, IAC took minority stakes in two privately held companies, car-sharing app Turo and home warranty specialist Fixd Repair.
For its part, Match Group is now free to chart its own course, without answering to a corporate overlord. "As a fully independent company, Match Group will benefit from increased strategic flexibility, enhanced trading liquidity, and the eligibility for index inclusion," according to the press release announcing the spinoff.