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Spin Off Ahead for Loan Web Site

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RISMEDIA, Nov. 7, 2007-(MCT)-In a dramatic remaking of media mogul Barry Diller’s Internet conglomerate, Charlotte-based LendingTree is set to become an independent company again.

New York-based IAC/InteractiveCorp. on Monday said it planned to spin off four companies to focus on core Web businesses such as Ask.com and Evite. LendingTree, an online loan matchmaker and lender, goes out on its own as it wrestles with a sharp downturn in the mortgage and housing markets.

Founded in 1996, LendingTree followed the dot-com playbook of going public in 2000 before being acquired by IAC in 2003 for about $700 million. Now it’s set to become its own publicly traded company again.

The standalone LendingTree will include related businesses RealEstate.com, Domania, GetSmart, Home Loan Center and iNest. LendingTree employs about 1,250 nationwide, including about 350 in its Ballantyne headquarters. RealEstate.com employs about 180 nationwide, mostly in Charlotte.

IAC, which will continue to hold about 30 brands, also will part with retailer HSN (formerly the Home Shopping Network), Ticketmaster and timeshare purveyor Interval International.

LendingTree goes free at a difficult time in its history. Since this spring, it has held its first layoffs and installed a new chief executive amid a major meltdown in the mortgage business. In the third quarter, the company recorded a loss of $5.6 million, helping pull down IAC’s earnings by 4% to $71.8 million.

In a conference call, Diller expressed confidence in LendingTree’s future despite a “horrible market.”

“It has a great brand name, and it will come out of this having gained share,” he said. “An awful lot of (mortgage companies) won’t be there. LendingTree will be.”

The spin-offs are expected to be completed in the second or third quarter of next year in a tax-free transaction. Specifics are still being worked out and need final approval of IAC’s board. Upon completion, IAC shareholders will own 100% of the equity in the five companies. IAC said C.D. Davies will remain chief executive of LendingTree and Bret Violette will continue to be president of RealEstate.com. LendingTree founder Doug Lebda, now the parent company’s president, will remain with IAC.

In the conference call, Diller, who will stay IAC’s chief executive, said he had been contemplating the restructuring since this summer, including consulting with retired General Electric Co. CEO Jack Welch. He said the company’s complexity had made it difficult to explain to investors, leading to an undervalued stock. He has previously spun off the travel Web site Expedia.

IAC on Monday shares jumped more than 7% to $31.84.

“It reduces complexity in a business that never should have been aggregated in the first place,” said Scott Devitt, an analyst at Stifel Nicolaus & Co. in Manassas, Va. “It’s a huge positive.”

Liberty Media Corp., which controls almost 60% of IAC and has granted Diller voting privileges for its stake, didn’t instigate the breakup, Liberty Chief Executive Officer Greg Maffei told Bloomberg News. Liberty chairman John Malone has been exploring ways to sell his position in IAC, including a possible transaction involving HSN.

The breakup should make it easier for the new companies to buy and sell brands since the deals won’t affect the entire operation, said Jean-Luc Nouzille, a portfolio manager at Bristlecone Value Partners LLC in Los Angeles that owns IAC shares.

Bloomberg News contributed.

Copyright © 2007, The Charlotte Observer, N.C.
Distributed by McClatchy-Tribune Information Services.

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