The Scene
Barry Diller’s IAC this morning bemoaned the “substantial discount” investors have accorded his media conglomerate. The company is worth less than the sum of its parts and is facing pressure from an activist investor.
CEOs complaining that their shares are undervalued is old fare, and media companies’ gripes go back to the 1980s, when ABC’s finance chief moaned that his company was “worth more dead than alive.” But there is a renewed sense of urgency as legacy media companies find themselves facing restive investors.
Activist hedge funds have typically stayed away from the sector, in part because its companies tend to be controlled by their moguls (Diller holds more than 40% of the votes at IAC). These companies have also been running activist playbooks on themselves, splitting up and recombining in an effort to get their stock prices up and compete with tech giants homing in on the content business.
With the stock market on sale and aging media companies on their heels, investors see a chance to extract value from the sector’s managed decline. IAC is contending with hedge fund Arkhouse, which has privately pushed the company to buy back more stock but is a believer in Diller’s “anti-conglomerate” model of incubating companies and then spinning them off, according to people familiar with the matter. (Diller’s company has $900 million in cash on its balance sheet and has now committed to retiring roughly 13% of its shares.)
Rohan’s view
To Arkhouse’s mind, IAC’s current predicament is, with the right maneuvers, temporary. Diller makes his shareholders money by growing businesses and selling them. MGM, for example, has been steadily buying back shares over the last few years. Dotdash Meredith, the holding company for a bevy of lifestyle brands and magazines, including People, has an enterprise value of $3.9 billion alone, Goldman Sachs analysts said in a March note.
That isn’t necessarily true for other media companies, many of which are seen as ripe targets for takeouts à la Apollo-Yahoo. Comcast’s SpinCo has earned an unenviable sobriquet — “Sh*tCo.”
The View From IAC CFO Christopher Halpin
Halpin said on IAC’s earnings call Tuesday that M&A was a key part of “IAC’s DNA and success.”
“Significant events to crystallize value have always been part of the IAC playbook,” he added.
“Spinning Angi was a key step in our strategy last quarter. Looking forward, we can’t say what such a catalyst may be. But we will be fearless in pursuing them if we believe they will benefit our shareholders.”
Notable
- Warner Bros. Discovery earlier this year added a new independent director under pressure from hedge fund Sessa Capital. Warner isn’t a controlled company — its 2022 spin-off from AT&T came in the form of a single class of stock — and there has been some delightful discourse lately about whether CEO David Zaslav qualifies for mogul status. But there are few easy fixes for the company beyond merging with a larger player as the need for scale in streaming becomes painfully clear.
- Comcast’s SpinCo finally has a name: Versant, CNBC reported Tuesday, which comes after months of internal deliberation and is supposed to emphasize “versatility.” It’s a more digestible name than IBM spinoff Kyndryl, at any rate.