Next month, potentially one of the most complex public transactions I’ve seen this year…. IAC Group, the majority owner of Match Group, is effectively transferring Match Group to a standalone listing. This will leave IAC Group holding ANGI Homeservices (Angie’s List, Homeadvisory etc) and a number of other businesses. The transaction also cleans up the classes of shares and reallocates some debt to Match Group.
Before transaction:
- Match Group: listed on NASDAQ. Represents 20% of Match Group equity.
- IAC Group: listed on NASDAQ, includes 80% of Match Group equity, 83% of ANGI Homeservices and a collection of other businesses.
After transaction:
- (new) Match Group: listed on NASDAQ. Full float. Will also inherit some debt from IAC Group.
- (new) IAC Group: listed on NASDAQ, includes 83% of ANGI Homeservices and a collection of other businesses.
Current IAC Group shareholders will get a certain number of (new) Match Group for every (old) IAC Group shares owned in addition to a ‘new’ holding of IAC Group shares (‘IAC new’).
A different sum of the parts
Previously analysts focussed on valuing IAC Group as a holding company for Match and ANGI however now with Match out of the picture, there is now increased focus on what exactly the other assets are, and how should they be valued. Given managements track record of value creation (Expedia, Hotels.com, Match Group), there is likely to be some hidden value in here. Below are some of their larger investments.
Cash
IAC was holding c. $3B in cash at the end of 2019. This will be supplemented by c. $1B of debt novated to Match Group. This should give a pro forma cash balance of c. $4B.
ANGI Homeservices
ANGI Homeservices is no doubt the largest asset in the portfolio. IAC Group owns c. 83% of the outstanding shares.
The share price, over the last six months, has been impacted heavily by COVID-19 impacts, and is still valued at c. $7B. Some pressure depending on economic outlook - however I think likely to be tailwinds as well - less travel and holdings, more people staying at home = more opportunity and desire to improve and renovate at home?
Vimeo
Vimeo is an online video platform, a sort of ‘more professional’ and enterprise version of YouTube and without the social element. A recent investor presentation pegs revenue at c. $200m ARR, with ARPU growing 20%+ p.a. Online video a very fast growing sector and Vimeo has some great dynamics.
If we use the BVP cloud index, the median EV/Annualized Revenue is c. 12x. Therefore, it would not be unreasonable to perhaps suggest a stand alone value of Vimeo of $2.4B. Which is not insignificant.
Dotdash
Dotdash is an online publishing business, growing 29% CAGR and with an adjusted EBITDA of $40m. The business used to be called About.com and has been through multiple media owners over the last decade.
Care.com
Care.com was acquired by IAC in February this year for $500m.
What does this all mean?
Once you adjust the IAC share price post-separation for ANGI holding ($5B?), expected cash holdings ($4B?) and an estimated valuation of Vimeo ($2B?), Care.com ($0.5B?) the remaining businesses in the group are almost at nil value in a ‘sum of the parts’ calculation. Given the historical success of management of growing and spinning out successful online brands, perhaps it would seem apparent that perhaps the market is valuing this incorrectly.