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:

November 11, 2015

Board of Directors
Angie’s List, Inc.
1030 E. Washington Street
Indianapolis, IN 46202

Dear Ladies and Gentlemen:

We very much appreciated Scott Durchslag and Thomas Fox taking the time to meet with us on October 23. We were disappointed to hear that the Board is not interested in further engaging with us regarding a strategic transaction involving Angie’s List. We continue to believe a transaction involving our companies has a compelling strategic rationale, and we are confident we are well-positioned to swiftly consummate a transaction that will be in the best interests of Angie’s List stockholders. In an effort to demonstrate our strong commitment to bringing our two companies together, outlined below is an updated proposal for the Board’s consideration.

We propose to acquire 100% of the outstanding capital stock of Angie’s List for a price of $8.75 per share in cash, representing a compelling premium of greater than 50% over the unaffected price of Angie’s List common stock as of October 12, 2015, the day immediately preceding disclosure of TCS Capital’s letter to the Angie’s List Board advocating pursuit of a strategic transaction, and over the trailing 90 day average trading price for the stock. Our price represents a greater than 18x multiple of the midpoint of your forecasted EBITDA range for this year – a very rich multiple for a business currently growing revenue at 7% year over year on a standalone basis.

While we see many benefits of a clear, high-premium, all-cash offer that would deliver immediate liquidity and certain value to your stockholders, we are also prepared to discuss a combination of Angie’s List with our HomeAdvisor business. This could be structured as a tax-free exchange for Angie’s List stockholders and would allow Angie’s List stockholders to participate in the upside resulting from the opportunities available to the combined company.

A combined HomeAdvisor-Angie’s List would have unparalleled consumer reach and an incomparable network of paid service professionals. It would have the ability to deploy technological innovations across an enormous footprint, creating an unmatched ability to deliver the best experience to the largest number of consumers and service providers alike. We are confident that the operating outlook for Angie’s List in a combination scenario would be substantially improved over its standalone prospects.

We believe the work required to finalize a mutually agreeable transaction would be quick, and we can manage it efficiently so as not to disrupt the Angie’s List day-to-day operations. The definitive terms of our proposal could be agreed in the course of a week and completed within a few months, as promptly as the regulatory processes permit. Our proposal is not conditioned on the receipt of financing.

Our strong preference would have been to work with you on a confidential and cooperative basis. However, we have been unable to develop any meaningful dialogue with you for many months now and were disappointed by your unwillingness to continue discussions with us following our meeting. Further, in light of the increase in the Angie’s List share price during the days that followed our October 5 letter to the Board expressing an interest in discussions, and further increases following our October 23 meeting and acquisition proposal, we determined it was advisable to publicly release the text of this letter concurrent with its delivery to the Board to ensure that your stockholders are fully apprised of the significant value afforded by our proposed transaction.

This letter does not represent or create any legally binding or enforceable obligations. No such obligations will be imposed on any party unless and until a definitive agreement is executed.

I assure you that this transaction has the highest priority for IAC. We look forward to working towards a transaction that creates value for all of our stockholders and, as we have indicated previously, we are prepared to meet with you immediately to discuss the same.

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