Why IAC Actually Wants to Acquire Angie's List

Has IAC/InterActiveCorp (NASDAQ: IACI) decided to be too aggressive in its acquisition policy? That is the question that some may ask after the company announced a formal takeover offer of Angie’s List Inc. (NASDAQ: ANGI) after the close of trading on Wednesday. IAC’s offer is for a public buyout price of $8.75 per share in an all-cash deal that is not subject to any financing contingencies. That being said, IAC has indicated that it is willing to consider a combination of Angie’s List with IAC’s HomeAdvisor business through a tax-free stock-for-stock exchange.

Just one problem here: Angie’s List turned down IAC. Angie’s List has seen its shares be suppressed earlier in the year as competition has risen, but the company has at least made the turn to become profitable.

IAC said that its all-cash proposal would bring more than a 50% premium over the unaffected price as of October 12, 2015 — the day immediately preceding disclosure of TCS Capital’s letter to the Angie’s List board of directors.

Angie’s List had $315 million in 2014 revenues (from $245 million in 2013), and Thomson Reuters has estimates of $345 million for 2015 and $368 million for 2016. Here is what Joey Levin, CEO of IAC/InterActiveCorp, had to say on the matter:

The combination of the Angie’s List brand, highly trafficked website and its network of paying service professionals with our HomeAdvisor business, the category leader which has seen eight consecutive quarters of accelerating growth in its core U.S. business, would cement our position as the premier home services platform. We are fully committed to this transaction and are confident that both Angie’s List stockholders and our stockholders will recognize the value of our proposal.

As far as what IAC would really get, the trick here is consolidating a key rival (or the key rival) in its market place for HomeAdvisor. The company said this would create the premier platform in the home services market, with over $700 million of revenue and an unparalleled network of active and high-quality service professionals capable of delivering consumers a best-in-class experience. It also claimed that the combined company would have over $35 billion in gross transaction value and over an estimated 15 million unique visitors per month.

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Angie’s List shares closed at $7.92 on Wednesday, but the stock was up 12% at $8.88 shortly before 5:00 p.m. Eastern Time in the after-hours session. Angie’s List shares have a 52-week range of $3.73 to $8.17. This was a $5.00 stock back in September, and its market cap at the closing bell price was $463 million, versus $5.8 billion for IAC.

IAC’s letter delivered to the company stated the following: