IAC still waiting on price falls for acquisitions

By Yinka Adegoke

NEW YORK (Reuters) - IAC/InterActiveCorp (IACI.O) Chief Executive Barry Diller said on Tuesday his company is biding its time and waiting for prices to drop before making any commitments in the merger and acquisition market.

Diller said the full impact of the ongoing U.S. recession had not been felt and would cause further declines in valuations for possible acquisition targets. His company has already identified a "slew of acquisitions" as possible opportunities, although most were small.

"We're raising the bar about what's going to get through in terms of acquisitive because we're absolutely convinced that now is the time to be patient," said Diller, speaking at a Citi Investment conference in Arizona. "Prices have not yet fallen into realistic valuations. It's inevitable that they will."

The Internet company will have over $2.2 billion on its balance sheet by March 31.

Some investors and analysts have called on Diller to consider returning cash to shareholders by way of a stock buyback or a dividend. But Diller said that, while he was not ruling out the possibility, it was not the right time to buy back stock due to the depressed market, which he said had worsened in recent weeks.

"If we think the moment is right and opportunistic to buy back stock, we'll do that, but it's not for this moment," he said.

IAC, which owns Internet assets, including Web search company Ask.com and dating site Match.com, will likely face some pressure from the wider slowdown in advertising. While it is expected Internet advertising will continue to grow, most analysts expect the pace to slow.

Around 50 percent of IAC's business is in the media and advertising sector, with the majority coming from search marketing revenue from Ask.com.

Diller said Ask does not have clear visibility on the outlook for cost-per-click pricing because his company's search marketing service is run on Google Inc's (GOOG.O) platform, but he said "the feel of it" was that prices being paid by cost- per-click advertisers for search terms are declining 5 percent to 10 percent year-over-year.

IAC shares closed up 24 cents at $16.35 on Nasdaq.

(Editing by Andre Grenon)