The good news for Barry Diller (IACI) is that he won’t have to endure the mortification of having John Malone fire him. The bad news is that investors get to focus on IAC again.
This is bad news not so much because investors don’t like what they see as because they have no idea what they see. IAC is in so many businesses that investors usually put IAC press releases down in boredom and confusion before they hack their way through the first divisional update. Then they move on to something simple and exciting, like Apple (AAPL).
This, of course, is one reason Barry is busting IAC into 5 separate companies. Some analysts, such as Doug Anmuth of Lehman Brothers, think this will unlock all sorts of value. Based purely on a free cash flow analysis, this seems plausible–as long as Barry can find some growth buried somewhere in there.
At some point, we promise to dig into IAC and figure out what’s hiding inside. For now, we’re going to take Doug’s word for it:
* At $22.30, IAC is trading at 5.6x 2008E EBITDA, with a 2008E Free Cash Flow yield of 8.5% [The latter is what matters. EBITDA is a bogus valuation metric]. $28 PT based on sum-of-the-parts valuation assuming consolidated ’08E EBITDA multiple of 7.4x on 2008E EBITDA of $870M.
* IAC has long traded at a discount to a sum-of-the-parts valuation, but we believe a viable path to unlocking that value now exists via spins, spons. spins, & asset swaps. [perhaps Doug can clarify the difference between “spins” and “spons. spins”]