Popular technology holding company, InterActiveCorporation (IAC) announced on the 19th of December, 2019, that it had concluded plans to spinoff all the shares of Match Group (NASDAQ: MTCH). Match is an American internet company that operates several dating websites like OkCupid, PlentyOfFish, Tinder, Hinge and Match.com. The company is headquartered in Dallas, Texas and its shares are publicly traded.
It was revealed that shareholders will receive one share of New Match and $3 per share in consideration, while IAC will receive $3 per share in cash.
In a statement, chairman and senior executive of IAC, Barry Diller said, “We’ve long said IAC is the ‘anti-conglomerate’, we’re not empire builders. We’ve always separated out our businesses as they’ve grown in scale and maturity and soon Match Group, as the seventh spinoff, will join an impressive group of IAC progeny collectively worth $58 billion today.”
The parent company IAC (NASDAQ: IAC) reached a definitive agreement to completely spin off its 80% stake in the dating site, a deal that had been approved by the board of directors of both companies. Match has carved out a niche in the online dating space, due to the solid growth experienced in its youth-oriented dating app, Tinder.
IAC is quite serial in spinning off its businesses. Some of the spunoff businesses include Expedia, HSN, LandingTree and four others. The company is also putting things in place to spinoff ANGI Homeservices once the deal with spinning off Match Group is accomplished.
Reactions to Match Group's Spin off
There are several reactions to the Match Group spinoff. First of the reaction is: what is in store for investors? Wallstreet is working to see if there is more liquidity in the stock, because they believe that the transaction will eliminate its current dual stock structure. This, hopefully will allow the stock to be considered for various stock indexes, enabling new and more institutional investors to buy the stock. This also gives Match Group greater flexibility in pursuing new opportunities through mergers and acquisitions.
Another reaction is the level of debt Match Group will incur due to its spin off. IAC has reportedly offered exchangeable notes that is worth about $1.7 billion, as well as hedging instruments from its balance sheet to Match Group's balance sheet. This figure alone more than doubles the $1.6 billion in long-term debt the corporation had at the end of the third quarter of 2019.
Furthermore, even though Match has a stronghold in the online dating space, it is gradually being faced with competition. For instance, Facebook (FB) launched its Dating App in September, 2019. This would be a source of concern to Match Group, as they will be faced with higher interest expenses and increased leverage, which may hinder its pursuit for greater international opportunities.
Following the news of the spinoff, Match Group stocks bounced sharply and the shares scaled back to the gains it previously had. Prior to the spinoff news, the shares of Match were on a decline due to slow revenue growth. Also, the 2019 Q3 revenue report exceeded the expectations of analyst.
Investors believe that the spinoff of Match Group from InterActiveCorp is a win-win for both companies, however IAC seems to be the one coming away with the most benefits. Investors also believe that Match Group's premier positioning and strong financial operations will probably allow it to successfully handle the enhanced debt load it will be carrying.
*The transaction is expected to close in the 2020 second quarter.