December 4, 2008 / 8:28 PM / 11 years ago

IAC sees cascade of M&A opportunities

NEW YORK (Reuters) - IAC/InteractiveCorp IACI.O Chief Executive Barry Diller is sitting on a pile of cash but he isn’t going to give in to investor demands that he buy back stock to rescue the company’s ailing share price.

Barry Diller, Chairman and Chief Executive Officer of IAC/InterActiveCorp, speaks at the Reuters Media Summit in New York, December 4, 2008. REUTERS/Shannon Stapleton

Instead, the Internet and media veteran is conserving his firepower so that IAC can swoop in on what he expects to be a “cascade” of acquisition opportunities at bargain prices, as the economy deteriorates further.

“My sense is that we wouldn’t be purchasers of our own stock and that’s because tomorrow will present unknown opportunities,” Diller told the Reuters Media Summit in New York on Thursday.

He expects IAC’s cash trove to swell to $2.2 billion by March next year, from the current $1.4 billion, and with little debt, that means the Internet media company could consider acquisitions of up to $5 billion in size.

“We can turn ourselves into any shape pretzel that opportunity presents,” said Diller, head of a company whose properties include the Ask.com search engine and Match.com dating service.

IAC shares fell to a session low of $13.86 following his comments, or a decline of 7.4 percent from the previous close, before easing up to end the day down 5.29 percent at $14.15.

The shares hit a 52-week low of $13.27 on October 8.

Diller concedes that he’s always been criticized for being overcapitalized, but shrugged off the idea that a share repurchase would boost investor interest in IAC.

“I don’t care if an investor buys our stock or not,” he said, adding that the fact that IAC was well-capitalized at a time when many others are struggling to refinance their heavy debt loads puts his company in good stead when a good target eventually comes along.

“In entertainment and media, I think there’s going to be a ‘cascade’ of acquisition opportunities,” Diller said, noting that valuations will fall further as the downturn worsens. “I don’t think now is the time to buy anything unless it’s desperately needed.”

Diller said he would be interested in deals in search, but not to acquire technology.

“The interest would be on audience, we would acquire audience absolutely. We would acquire vertical audiences as we acquired with Dictionary.com, Thesauraus.com,” he said.

He expects there to be more consolidation in the market where IAC’s Ask.com is fourth in terms of search queries, after Google (GOOG.O), Yahoo YHOO.O, and Microsoft’s (MSFT.O) MSN. Tie-ups between smaller players would be good in a search market where Google has a more than 60 percent share, he said.

“Google is such a force in search that without various forms of consolidation and growth I think it’s going to be very difficult,” Diller said.

Ask.com has a search marketing agreement with Google, and makes the majority of its revenue through this partnership.

Diller would not name potential acquisition targets, but indicated he was not interested in online social networks as they are not particularly conducive to generating advertising sales.

“Think of the bimbo words this Internet has created: portal, social network; I could riff on ... networking, horrible word too,” he added.

Diller also said he is considering disposing non-core business assets though he declined to say which of IAC’s 35 units is being looked at.

The company considers its core assets to include search, advertising, dating, and travel. The disposal could contribute to its higher cash expectation by March 2009.

(For summit blog: summitnotebook.reuters.com/)

(Additional reporting by Sue Zeidler and Fred Katayama; Editing by Tiffany Wu)

Visit blogs.reuters.com/mediafile/ for more coverage at the Reuters MediaFile blog

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