What happened
Shares of IAC/InterActiveCorp (IAC +0.00%) rose 11.9% in December 2019, according to data from S&P Global Market Intelligence. The media and online content conglomerate gained 11% in the space of two days thanks to a couple of potentially game-changing deals.
Image source: Getty Images.
So what
First, IAC's stock went up 7.8% on the news that the company is selling off its holdings in Match Group (MTCH +0.00%), creating two entirely separate companies. Before this deal, which had been coming for some time, IAC owned 80% of the Tinder parent's shares.
The next day, IAC announced a tender offer of $15 per share in a buyout bid for family care specialist Care.com (CRCM +0.00%).
Shareholders applauded both the Match Group split and the Care.com acquisition.
Now what
The Match Group deal should bolster IAC's balance sheet with a net cash infusion of at least $700 million. The company is also expected to move roughly $1.7 of long-term debt to Match Group's balance sheet. The $550 million Care.com buyout looks small next to these big financial transactions, but it could be the first of many smaller deals that combine to move IAC into a lower-risk market.
IAC's shares have now gained a total of 46.4% over the last year, trading at a reasonable valuation of 25 times free cash flows. The company is rebuilding itself under a business model with lower top-line growth but stronger cash flows. Market makers are embracing the new and improved IAC/InterActiveCorp.
