UPDATE 1-Liberty CEO says questioned Diller's hold on IAC
WILMINGTON, Del., March 11 (Reuters) - Liberty Media Chief Executive Greg Maffei on Tuesday said he and Chairman John Malone disagreed for more than a year about whether they could wrest control of IAC/InterActiveCorp from mogul Barry Diller.
But that didn't stop Maffei from making his case to Wall Street in private discussions, saying Diller's right to vote Liberty's controlling 62 percent stake was not ironclad, Maffei told a Delaware court. Liberty owns about 30 percent of IAC, but has voting control through a class of super-voting shares.
The proxy agreement between Liberty and IAC (IACI.O) Chairman and CEO Diller is at the heart of a trial between the companies in Delaware Chancery Court. They are fighting over Diller's proposal to reconfigure IAC by spinning off four of its main units in a way that would dilute Liberty's voting power over the businesses.
"When asked the question of whether that proxy was irrevocable or not, I tried to maintain the position that there were arguments under which that proxy could be revoked," Maffei told the court under questioning from IAC's lawyer, Marc Wolinsky of Wachtell, Lipton, Rosen & Katz.
Maffei said he had maintained that position in discussions with analysts and investors, though the company did not make the idea public in a regulatory filing.
Maffei also acknowledged that Malone did not agree with the idea, which stemmed from a review of the original control agreements forged between Liberty's chairman and Diller.
He was called to the stand by IAC, which has stressed a history of personal disagreement between Maffei and Diller as a key factor in the unraveling ties with Liberty. Liberty has argued that it aims to preserve the value of its IAC holding after years of seeing the shares lag the Nasdaq.
Maffei also had a disagreement over options he held in Expedia (EXPE.O), the online travel company he helped sell to IAC. It was later spun off.
After Maffei was named CEO of Liberty in late 2005, he informed the board that he could still come into legal conflict with IAC and Diller over the options that had at the time been worth close to $28 million.
"It would be difficult to sue those companies (IAC and Expedia) in this condition, so I've let that potential claim remain out there and I've not yet acted on that," Maffei said.
Diller has asked the court to uphold his right to vote Liberty's shares, while Liberty has accused Diller of violating their proxy agreement and demanded his ouster, along with six other members of the IAC board.
Liberty lawyers had raised the idea more than a year ago that Diller's control of the voting stake stemmed not from the proxy but from his position as sole director of a group of companies named BDTV, through which Liberty owns IAC shares.
Malone told the court on Monday he had discussed the view with Diller in May 2006. Malone described that line of thinking as "brain damage" because it did not reflect the original deal between the two men or match the way he had presented it to the public for some 10 years.
"I remember he was not particularly supportive of the argument," Maffei said. "Because Dr. Malone wasn't really willing to support it, we never used the threat until such time as he (Diller) sued us."
Liberty invoked the BDTV argument when the two sides sued each other in January. It named Maffei to replace Diller as sole director of the companies but dropped the claim last week.
After more than a year of inconclusive talks with Liberty on an asset swap centered on IAC's shopping channel HSN, Diller proposed last November that IAC split off four of its businesses and focus on faster-growing Internet media and advertising operations.
Malone initially backed the idea, but opposed it when Diller said the spinoffs should have a single-tier share structure to make them attractive to investors. The plan would cut Liberty's control over them by nearly half.
Diller is due to testify later in the week. Vice Chancellor Stephen Lamb is expected to issue a ruling on the case within two to three weeks of the end of the trial.
Some analysts expect that even after the trial, the two sides will agree to swap HSN, and possibly one other unit, to Liberty in return for Liberty's stake in IAC. The other proposed IAC spinoffs are the LendingTree mortgage site, Ticketmaster box office service and Interval time-share exchange.
IAC shares have fallen 21 percent since the current lawsuits were filed. They closed 2.8 percent higher at $19.55 on Tuesday. Liberty Media's Liberty Interactive shares rose 5.5 percent to $15.44. (Editing by Gary Hill)
- Ukraine seeks to join NATO; defiant Putin compares Kiev to Nazis |
- California passes 'yes-means-yes' campus sexual assault bill
- In town halls, U.S. lawmakers hear voter anger over illegal migrants |
- IBM launches Watson system for research, hopes for breakthroughs
- Family of instructor killed at Arizona gun range does not blame girl