IAC and Expedia

WSJ 12/21/04 Diller to Break Up IAC
E-Commerce Firm Decides To Split Off Travel Business Into Publicly Traded Entity

Expedia will include businesses such as Expedia, Hotels.com and Hotwire, a discount online travel company. Together the businesses currently account for about 30% of IAC's revenue and about 55% of its operating income.

The breakup will leave behind a collection of businesses Mr. Diller has acquired since he launched what would become IAC in 1995, including HSN, the television shopping channel, Ticketmaster, Citysearch, a local search service, and LendingTree, an online finance company.

By creating a pure travel company, IAC hopes put an end to the chronic confusion surrounding the company's 42 separate businesses and ultimately boost the company's overall valuation. IAC now has a stock-market value of $18 billion, and Expedia likely will be valued at roughly half of that, based on estimates from several Wall Street analysts.

Based on recent performance, Expedia likely will be the faster growing of the two companies, while IAC will be a profit generator with a steady stream of cash flow that will enable it to grow through acquisitions and by nurturing young companies.

IAC's breakup comes in contrast to the strategy being pursued by Cendant Corp., which has added a series of travel acquisitions to a conglomerate that controls businesses as varied as real-estate brokerage firms and loyalty-marketing programs. In just the past few months, Cendant purchased travel Web site Orbitz for about $1 billion, U.K. travel Web site ebookers for $404 million and spent $1.1 billion for U.K. travel businesses Gullivers Travel Associates and Octopus Travel Group Ltd.