EUR 464.20 For Business Accounts Only

Hold for Next Week's Distribution & Anticipated Value Creation

We recommend new investors to buy (and current investors to hold) IAC/InterActiveCorp (IAC) heading into its stake distribution in Match Group, Inc. (MTCH), which is expected to be completed next week on June 30, 2020. Since our pre-Spin entry in the Model Portfolio (Feb 18, 2020), IAC has provided a +27% return with more to come for both IAC and MTCH post-Spin. See the updated analysis for our key details and valuations.

Model Portfolio Performance...
IAC entered our Model Portfolio pre-Spin on February 18 with a +2.5% weighting at around $238. Since that entry, IAC has rallied +27% to date, though we also added to our position at lower levels. On February 28, we added +2% to our position at $199, and again another +1% on March 10 at $194, bringing our total adjusted return on IAC to +40% to date.

What's Happening?
After a series of successful separations which have maximized value for shareholders, media and internet holding company IAC/InterActiveCorp (IAC) is back again with another Spinoff of its most valuable asset, Match Group, Inc. (MTCH). We believe this is the right next step toward further value creation, reflected IAC’s and MTCH’s share price movements following the announcement on August 6, 2019 (+10% and +24%, respectively, the next trading day of announcement compared to the SPX return of +1.3%). IAC will distribute its entire stake (80.7%) directly to shareholders, with a few adjustments shifting between cash and equity to determine the final distribution ratio of MTCH shares.

Management Rationale for the Spinoff: IAC regularly evaluates its portfolio for the possibility of separating units to ensure improved prospects and value creation. Additionally, IAC’s investment philosophy is focused on being an “anti-conglomerate.” In its long history as a publicly listed company, IAC has Spun off many businesses after achieving sizeable scale and maturity, including Expedia Group, Inc. (EXPE), LendingTree, Inc. (TREE), Ticketmaster Entertainment, Inc. (TKTM), ILG, Inc. (ILG) and HSN, Inc. (HSNI).

The Edge View...
We believe this move is in-line with IAC’s track record of investing in incumbent internet companies and Spinning off matured entities. IAC is using the Spinoff as an opportunity to bolster its own balance sheet by transferring its entire debt to MTCH and receiving cash consideration of $2.9bn. In our view, the separation will allow IAC to focus on building the scale of its other businesses and drive further shareholder value, while MTCH will benefit from optimized investment decisions to pursue organic/inorganic growth opportunities, and from enhanced trading liquidity due to a higher float and the elimination of its current dual-class structure, which makes it eligible for inclusion in the SPX Index. Therefore, we believe this transaction is a win-win for both companies.