IAC to Spin Off Angi, its Home Services Platform
IAC, the parent company of numerous internet businesses, announced Monday its plans to spin off Angi, its home services marketplace. This move, announced alongside IAC’s third-quarter earnings release, sent Angi’s stock price soaring in after-hours trading, signaling investor optimism about the platform’s potential as an independent entity. The decision reflects IAC’s long-standing strategy of incubating businesses and then spinning them off to maximize shareholder value. While the exact timeline remains unclear, IAC CEO Joey Levin anticipates the transaction to be completed by the end of its second quarter.
Key Takeaways:
- Angi Spin-off: IAC, a significant player in the online services market, plans to spin off Angi, its home services platform, which connects consumers with professionals offering services like electrical work and landscaping.
- Stock Surge: Angi’s stock price experienced a significant increase – as much as 10% – following the announcement, reflecting a positive market response to the news.
- Strategic Rationale: IAC CEO Joey Levin believes that operating independently will allow Angi to better capitalize on its growth potential, benefiting shareholders and showcasing the success of their incubation model.
- Timeline & Process: While a precise schedule isn’t established yet, IAC intends to complete the Angi spin-off by the end of its next fiscal quarter (Q2).
- IAC’s Track Record: This spin-off continues IAC’s successful history of cultivating and then launching independent businesses, demonstrating a pattern of strategic exits to maximize returns.
Angi’s Performance and the Rationale Behind the Spin-off
While Angi’s third-quarter revenue showed a 16% year-over-year decline to $296.7 million, primarily due to reduced marketing spending leading to fewer service requests, IAC’s CEO, Joey Levin, expressed confidence in its future prospects. In his letter to shareholders, he stated that **”Angi’s economic foundation continues to strengthen, and we suspect that Angi’s best shot at realizing that upside to the benefit of our shareholders may be as a standalone company.”** This highlights a belief that independence will allow Angi to tailor its strategies and investments more effectively, fostering sustainable growth. The reduced marketing spending itself could be seen as a calculated move to improve profitability and efficiency in preparation for standalone operation.
Angi’s Restructuring and Growth Potential
The decision to spin off Angi, which encompasses the brands Handy and HomeAdvisor along with its core platform, isn’t a sudden impulse. IAC has been contemplating this move for several years. The company’s previous postponement in 2019 was attributed to prioritizing the spin off of Match Group. Now, with a stronger foundation and a clearer understanding of the market, IAC believes the time is right to allow Angi to flourish independently. The company’s focus on improving profitability, suggesting a strategic shift before independence toward operational efficiency, bodes well for the spin-off’s chances of success. Furthermore, the expectation of resumed revenue growth demonstrates a clear vision and a belief in the underlying strengths of the platform.
IAC’s History of Successful Spin-offs
IAC’s long history of nurturing businesses and successfully spinning them off is a compelling argument for Angi’s future. This strategy has generated significant returns for shareholders over the years, positioning IAC as an adept curator rather than a long-term owner of certain enterprises. This model demonstrates a belief in strategically timing exits, allowing spun-off businesses to capture the full market value unburdened by the complexities of a larger parent company.
Notable Examples of Successful Spin-offs:
Some of IAC’s notable spin-offs include Expedia, Ticketmaster, and LendingTree – all companies that have thrived as independent entities. This success underscores IAC’s expertise in identifying promising businesses, nurturing their growth, and then positioning them for optimal performance through separation. The track record is a key factor influencing investor confidence in Angi’s future success, indicating a reduced risk associated with a standalone venture.
IAC’s Diversification Strategy: Introducing Care.com Results
In addition to the Angi news, IAC’s third-quarter earnings release also marked the first time the company publicly unveiled the performance of its Care.com segment. Acquired in 2019 for nearly $500 million, Care.com offers an online marketplace to connect consumers with caregivers for children, seniors, and pets. The segment reported a 6% year-over-year decline in revenue, reaching $95.7 million. While the decline might seem negative, IAC clarified that adjusted EBITDA for Care.com shows a positive $46 million for the last 12 months, indicating profitability despite the revenue drop. This is a significant addition to understanding the diverse portfolio and financial health of IAC, further emphasizing its ability to incubate and manage multiple different business models.
Analyzing Care.com’s Performance
The inclusion of Care.com results gives investors a more comprehensive view of IAC’s diverse business portfolio and its financial robustness. While the revenue decline might raise some questions, the positive EBITDA suggests underlying operational efficiency, a strong indication of longer-term soundness and growth prospects. Although not directly related to the Angi spin-off, this illustrates IAC’s multi-faceted approach to business and their ability to nurture and manage a diverse range of sectors, enhancing the overall narrative around their business practices.
Conclusion: A Strategic Move with Positive Implications
IAC’s decision to spin off Angi represents a strategic and calculated move based on a thorough assessment of the company’s potential. The positive market reaction, demonstrated by the surge in Angi’s stock price, underscores investor confidence in the move. The move aligns with IAC’s proven track record of successfully launching independent businesses, positioning Angi for stronger future growth and maximized shareholder value. By highlighting Angi’s resilience and the larger portfolio’s financial health, investors have a clearer view of the company’s long-term value creation strategy.
Further detailed analysis of the financial data should be undertaken by investors to form a truly informed opinion, yet from this news alone, the spin-off is expected to be a positive development for both IAC and Angi, demonstrating a powerful business strategy predicated on strategic incubation and timely exits of successful subsidiaries. Looking ahead, the success of Angi’s standalone operation presents a compelling case study for other large corporations considering similar strategies for growth and value creation.
