Shares of Angie’s List Inc. (NASDAQ: ANGI) were up sharply after the announcement that it will merge with IAC/InterActiveCorp (NASDAQ: IAC). This might all sound familiar when you consider that Barry Diller’s IAC tried to acquire the company before.
The companies confirmed that Angie’s List will combine with IAC’s Home Advisor unit, and where this gets interesting is that both stocks were reacting positively to the news. Often the shares of the company making an acquisition fall on dilution and execution risks.
Under the terms of the transaction, Angie’s List stockholders will have the right to elect to receive either one share of Class A common stock of the combined company ANGI Homeservices or $8.50 per share in cash, for each share of Angie’s List stock that they own, with the total amount of cash available in the transaction capped at $130 million.
This deal is not expected to close until the fourth quarter, but some analysts have already weighed in.
Credit Suisse raised its price target on IAC to $88 from $85 on a modified the sum of the parts valuation. The firm reiterated an Outperform rating and noted that the combined HomeAdvisor and Angie’s List will create a $1 billion-plus revenue services leader in space. Its valuation is based on the blended average of the prior sum of the parts analysis, the earnings multiple and on a cash flow analysis. Credit Suisse said in its report:
We note that the sum of the parts analysis derives a higher IAC value of $102. For HomeAdvisor’s $2.2bn value, we apply 10x 2018 Angie’s List HomeServices EBITDA of $270 million to derive a $2.7 billion value from which we deduct $500 million in Angie’s List market value. The primary risk to our estimates is execution risk related to salesforce driven local models.
Here’s what a few other analysts said about the companies after the fact:
- Loop Capital downgraded Angie’s List to Hold.
- Jefferies said that it is positive on the deal as it positions IAC as the premier player in the home services market place.
- Barclays raised its price target on IAC to $96 from $82.
- SunTrust Robinson has a Buy rating for IAC and raised its price target to $87.
Shares of Angie’s List were trading up 60% at $9.45 on Tuesday, with a consensus analyst price target of $7.71 and a 52-week trading range of $5.22 to $10.76.
IAC shares were last seen up 17% at $98.43, with a consensus price target of $85.50 and a 52-week range of $46.88 to $100.42.