UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MARCH 28, 2005
--------------
IAC/INTERACTIVECORP
(Exact name of registrant as specified in its charter)
Delaware 0-20570 59-2712887
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
152 West 57th Street, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)314-7300.
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[X] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[X] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01 OTHER EVENTS.
SHARE REPURCHASE PROGRAM
IAC/InterActiveCorp (the "Company") announced today that it would commence
purchasing shares of its common stock as previously authorized by its Board of
Directors and announced by the Company. Attached hereto as exhibit 99.1 and
incorporated by reference herein is a copy of the press release issued today.
IAC will disclose purchases under its share purchase program periodically in
accordance with applicable law.
INFORMATION CONCERNING THE SPIN-OFF
In light of the Company's intended repurchases, the Company has decided to
provide the following information, which may be of interest to investors, about
its current plans for its previously announced spin-off transaction. The
information that follows represents the Company's current intentions relating to
how the spin-off will be effected, and these intentions may change. The Company
does not undertake to update this information prior to filing its preliminary
proxy statement-prospectus relating to the spin-off.
GENERAL
In December 2004, the Board of Directors approved a plan to separate IAC into
two publicly traded companies:
o Expedia, which will consist of the domestic and international
operations associated with Expedia.com, Hotels.com, Hotwire,
TravelNow.com, Activity World, HotelDiscount.com, Condosaver.com,
AllLuxuryHotels.com, Anyway.com, eLong, Expedia Corporate Travel,
Classic Custom Vacations, and TripAdvisor; and
o IAC, which will consist of the rest of IAC's businesses, including its
Ticketing business, including Ticketmaster, ReserveAmerica, TicketWeb
and MuseumTix.com; Electronic Retailing business, including HSN,
HSN.com, HSE 24, America's Store, Improvements, and 9Live; Financial
Services and Real Estate, including LendingTree, RealEstate.com,
GetSmart, iNest, and Domania; Local and Media Services, including
Citysearch, ServiceMagic, Entertainment Publications, and Evite;
Personals, including Match.com and uDate; Teleservices, including
Precision Response Corporation, Access Direct, and Hancock Information
Group; Interval International and TV Travel Shop. In addition, IAC
will include Ask Jeeves, Inc. and Cornerstone Brands, Inc. subject to
the closing of those transactions.
STRUCTURE
IAC intends to effect the spin-off via amendments to its certificate of
incorporation that would:
o Reclassify each share of IAC $0.01 par value common stock into one
share of IAC $0.001 par value common stock and 1/100 of a share of IAC
Series 1 Mandatory Exchangeable Preferred Stock that will
automatically exchange into one share of Expedia $0.001 par value
common stock immediately following the reclassification; and
o Reclassify each share of IAC $0.01 par value Class B common stock into
one share of IAC $0.001 par value Class B common stock and 1/100 of a
share of IAC Series 2 Mandatory Exchangeable Preferred Stock that will
automatically exchange into one share of Expedia $0.001 par value
Class B common stock immediately following the reclassification.
If IAC's stockholders approve the proposed amendments to the IAC certificate of
incorporation and IAC completes the spin-off, the holders of IAC common shares
immediately prior to the spin-off would initially own all of the IAC common
shares and Expedia common shares immediately following the spin-off. IAC may
determine not to proceed with the spin-off and not to make the amendments to its
certificate of incorporation described above, notwithstanding the fact that IAC
receives all necessary stockholder approvals.
It is currently contemplated that immediately prior to the reclassification
described above IAC would effect a 2 for 1 reverse stock split with respect to
each of the IAC common stock and the IAC Class B common stock. Share numbers
(including with respect to options and restricted stock units) contained in this
report do not take into account the effects of the reverse stock split.
STOCKHOLDER APPROVALS
In addition to the votes required under Delaware law, based on the preliminary
recommendation of a special committee of independent directors of IAC
established to review aspects of the proposed spin-off that could involve
potential conflicts of interest, the Company anticipates that the spin-off will
be conditioned on approval by the affirmative vote of holders of a majority of
the shares of IAC common stock actually voting, other than shares owned or
controlled by IAC's management (which include the shares owned by Liberty Media
Corporation and NBC-Universal over which Barry Diller, the Company's Chairman
and Chief Executive Officer, holds proxies).
GOVERNANCE ARRANGEMENTS
Assuming completion of the spin-off, it is currently anticipated that the
governance and stockholder arrangements at Expedia would mirror in all material
respects the current governance and stockholder arrangements at IAC, including:
o Liberty's entitlement to nominate directors for election to the
Expedia Board of Directors;
o a high vote/low vote common stock capital structure with shares of
Expedia common stock entitled to one vote per share and shares of
Expedia Class B common stock entitled to ten votes per share;
o a proxy from NBC-Universal in favor of Mr. Diller to vote the 56.6
million shares of Expedia stock (which would include 13.4 million
shares of Expedia Class B common stock) that would be beneficially
owned by it following the spin-off; and
o governance arrangements with Expedia, Liberty and Mr. Diller and
stockholder agreements between Liberty and Mr. Diller (including a
proxy from Liberty in favor of Mr. Diller to vote Liberty's Expedia
stock) such that following the spin-off, Mr. Diller will control the
outcome of practically all matters submitted to a vote or for the
consent of Expedia's stockholders (other than with respect to the
election by the holders of Expedia common stock of 25% of the members
of Expedia's Board of Directors and matters as to which Delaware law
requires a separate class vote).
TREATMENT OF DERIVATIVE SECURITIES
IAC CUMULATIVE CONVERTIBLE PREFERRED STOCK. It is currently anticipated
that each share of IAC Series A Cumulative Convertible Preferred Stock will
represent the right to receive, at the holder's election: (1) $50.00 in cash per
share, plus accrued and unpaid dividends, which would be paid by IAC, (2) the
IAC common stock and Expedia common stock that a holder of IAC Series A
Cumulative Convertible Preferred Stock would have received had the holder
converted its Series A Cumulative Convertible Preferred Stock into IAC common
stock immediately prior to the spin-off, or (3) one share of IAC preferred stock
and one share of Expedia preferred stock, each of which will mirror in all
material respects the terms of the current IAC Series A Cumulative Preferred
Stock, as adjusted to reflect the spin-off. We expect that IAC will enter into
an arrangement pursuant to which it will be financially responsible for future
redemptions of any Expedia preferred stock outstanding following the spin-off.
WARRANTS TO PURCHASE IAC COMMON STOCK. It is currently anticipated that
each warrant to purchase shares of IAC common stock will convert into a warrant
to purchase shares of IAC common stock and a warrant to purchase shares of
Expedia common stock with exercise prices adjusted based on the market
capitalization of each company promptly following the spin-off relative to the
market capitalization of IAC prior to the spin-off.
ASK JEEVES, INC. ZERO COUPON CONVERTIBLE SUBORDINATED Notes. Subject to
satisfaction of applicable closing conditions, upon consummation of the
acquisition of Ask Jeeves, IAC will assume the $115 million principal
amount of Ask Jeeves, Inc. Zero Coupon Convertible Notes Due June 1, 2008 and
these notes (which are currently convertible into shares of Ask Jeeves common
stock) will become convertible upon exercise by the holders into shares of IAC
common stock based upon the exchange ratio in the IAC/Ask Jeeves merger
agreement. Following the spin-off, IAC will remain the obligor with respect to
the notes and each note will be convertible upon exercise by the holders into
such number of shares of IAC common stock and New Expedia common stock that a
note holder would have received had the holder converted its notes immediately
prior to the spin-off.
EQUITY COMPENSATION. We currently expect outstanding IAC equity
compensation to be treated as follows in the transaction:
VESTED OPTIONS. Each vested option to purchase a share of IAC common stock
will convert into a vested option to purchase a share of IAC common stock
and a vested option to purchase a share of Expedia common stock, with
adjustments to exercise prices based on the market capitalization of each
company promptly following the spin-off relative to the market
capitalization of IAC prior to the spin-off.
UNVESTED OPTIONS. Each unvested option to purchase shares of IAC common
stock will convert into an unvested option to purchase a greater number of
shares of the employer (IAC or Expedia, as the case may be) for which the
applicable employee will work following the spin-off at reduced per share
exercise prices. These adjustments will be based on the market
capitalization of the employer promptly following the spin-off relative to
the market capitalization of IAC prior to the spin-off.
RESTRICTED STOCK UNITS. Each IAC restricted stock unit will convert into a
greater number of restricted stock units of the employer (IAC or Expedia,
as the case may be) for which the applicable employee will work following
the spin-off. The adjustment will be based on the market capitalization of
the employer promptly following the spin-off relative to the market
capitalization of IAC prior to the spin-off.
EQUITY OF MR. DILLER AND MR. KAUFMAN. Mr. Diller, the Company's Chairman
and Chief Executive Officer, and Victor Kaufman, the Company's Vice
Chairman, are expected to continue to serve in such roles at IAC following
the transaction and also to serve as Chairman and Vice Chairman,
respectively, at Expedia following the transaction. Accordingly, all
outstanding equity awards held by Messrs. Diller and Kaufman will be split
between the two companies based on the market capitalization of each
company promptly following the spinoff relative to the market
capitalization of IAC prior to the spin-off.
The adjustments described above are intended to result in the value of the
relevant equity award immediately following the adjustments being equivalent to
the value of the equity award immediately prior to the transaction.
Set forth below is a schedule showing the number of vested options, unvested
options and RSUs, along with weighted average exercise prices of the options,
that we expect to be outstanding as of May 31, 2005 and categorized based on the
currently anticipated division of employees between IAC and Expedia following
the spin-off. These numbers may not accurately represent the outstanding equity
profile as of the effective date of the spin-off, as new equity awards may be
granted and vested options may be exercised, prior to May 31, 2005, and the
spin-off may occur before or after such date. In addition, the information set
forth below does not give effect to the adjustments described above with respect
to the numbers of options and restricted stock units and option exercise prices.
VESTED OPTIONS UNVESTED OPTIONS
# AVG. EXERCISE $ # AVG. EXERCISE $ RSUs
------- --------------- ------- --------------- ----
Expedia 12.4 million $11.52 5.4 million $14.68 5.3 million
IAC* 13.1 million $22.40 1.2 million $20.76 6.6 million
Messrs. Diller
& Kaufman 43.5 million $7.95 0.1 million $23.82 0.3 million
* In connection with the Cornerstone acquisition, we expect to assume
approximately 1.6 million unvested options with an average exercise price of
$9.07 per share. Expected Cornerstone option conversions are based on a five-day
trading average of IAC common stock ending on the day before the closing date of the
transaction. For purposes of this calculation, we used the five-day trading
average ending on March 24, 2005 of $21.73. We expect the transaction to close
on April 1, 2005. In connection with the Ask Jeeves acquisition, we expect to
assume approximately 4 million vested options with an average exercise price of
$10.96 and approximately 6 million unvested options with an average exercise
price of $16.79 per share. It is possible that Ask Jeeves will grant additional
options prior to the acquisition.
CERTAIN FINANCIAL INFORMATION
INITIAL EXPEDIA CAPITALIZATION. We currently anticipate that IAC will
allocate to Expedia $250 million of cash and cash equivalents upon the closing
of the transaction and that all other cash at Expedia will be distributed to IAC
prior to consummation of the spin-off. Additionally, we anticipate that Expedia
will have in effect a revolving credit facility of $500 million.
2004 FINANCIAL RESULTS. The revenue, Operating Income and Operating Income
Before Amortization of the businesses that will comprise Expedia and the
businesses that will comprise IAC is set forth below for fiscal year 2004.
(in millions)
REVENUE OPERATING INCOME OPERATING INCOME BEFORE AMORTIZATION
------- ---------------- ------------------------------------
IAC* $4,366 $142 $552
Expedia $1,843 $425 $567
Corporate** N/A ($334) ($94)
* Additionally, in 2004 Cornerstone had Revenue, Operating Income and Operating
Income Before Amortization of $714, $57 and $57, respectively, and Ask Jeeves
had Revenue, Operating Income and Operating Income Before Amortization of $261,
$56, and $75, respectively. Each of these businesses will be part of IAC after
the spin-off, subject to the closing of the transactions.
** IAC currently recognizes all expenses associated with equity compensation in
its Corporate Expense line item. Accordingly, after the spin-off, a significant
portion of this amount will be recognized at Expedia. In 2004, of the $241.7
million in non-cash compensation expense recognized at the Company, $70.3
million was attributable to IAC and $171.4 million was attributable to Expedia
on a pro forma basis giving effect to the spin-off. Additionally, the equity
modifications related to the spin-off described above, as well as the assumption
of equity awards in the Cornerstone and Ask Jeeves transactions, will result in
significant additional non-cash compensation charges, some of which will be
expensed immediately at the time of the spin-off and some of which will be
expensed over the remaining vesting periods of outstanding equity awards. With
respect to corporate expenses other than non-cash compensation, we currently
expect modest reductions at IAC following the transaction and increases at
Expedia (Expedia "corporate expenses" are currently reflected in the general IAC
Travel results).
VUE CLASS B PREFERRED INTERESTS. Following the spin-off, IAC will continue
to hold its various interests in Vivendi Universal Entertainment, the joint
venture currently controlled by NBC-Universal ("VUE"). Currently, IAC has the
right to put its VUE Series B Preferred Interest to NBC-Universal in 2022 for an
amount equal to the lesser of the then face-value of approximately $2.3 billion
or the value of the 56.6 million IAC common shares held by NBC-Universal, which
may be satisfied in IAC common shares or a combination of cash and shares. After
the spin-off, the value of the Series B Preferred Interests will depend on the
market value of the IAC and Expedia securities into which NBC-Universal's IAC
shares are reclassified in the transaction. IAC is currently evaluating the
extent to which mark-to-market accounting will be required in connection with
its Series B Preferred Interest as a result of the fact that the underlying
value of the securities will be partially dependent on the value of a third
party security (Expedia shares) following the spin-off. Such accounting
treatment could have material positive or negative effects on IAC's GAAP net
income on a quarterly basis, depending on movements in the price of both IAC
common stock and Expedia common stock after the spin-off. The treatment will
not, however, affect IAC's Operating Income Before Amortization or Adjusted Net
Income.
# # # #
FORWARD LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include statements relating to IAC's anticipated financial
performance, business prospects, new developments and similar matters, and/or
statements preceded by, followed by or that include the words "believes,"
"could," "expects," "anticipates," "estimates," "intends," "plans," or similar
expressions. These forward-looking statements are based on management's current
expectations and assumptions, which are inherently subject to uncertainties,
risks and changes in circumstances that are difficult to predict. Actual results
may differ materially from those suggested by the forward-looking statements due
to a variety of factors, including changes in business, political, and economic
conditions due to the threat of future terrorist activity or otherwise, actions
and initiatives by current and potential competitors, changes in the
availability of favorably priced inventory, changes in occupancy rates, the
effect of current and future legislation or regulation, the ability to make cost
efficient expenditures in connection with expanding our reach, the ability to
expand our reach into international markets, and certain other additional
factors described in IAC's filings with the Securities and Exchange Commission.
Other unknown or unpredictable factors also could have material adverse effects
on IAC's future results, performance or achievements. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events discussed in
this document may not occur. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date stated, or if
no date is stated, as of the date of this document.
IAC is not under any obligation and does not intend to make publicly
available any update or other revisions to any of the forward-looking statements
contained in this document to reflect circumstances existing after the date of
this document or to reflect the occurrence of future events even if experience
or future events make it clear that any expected results expressed or implied by
those forward-looking statements will not be realized.
ADDITIONAL INFORMATION ABOUT THE ASK JEEVES ACQUISITION
IAC intends to file a registration statement with the Securities and
Exchange Commission ("SEC") that will include a combined proxy
statement/prospectus of Ask Jeeves and IAC and other relevant documents in
connection with the proposed merger. Ask Jeeves stockholders should read the
proxy statement/prospectus and other relevant materials when they become
available, because they will contain important information about Ask Jeeves, IAC
and the proposed merger.
In addition to the documents described above, Ask Jeeves and IAC file
annual, quarterly and current reports, proxy statements and other information
with the SEC. The proxy statement/prospectus and other relevant materials (when
they become available), and any other documents filed with the SEC by Ask Jeeves
or IAC are available without charge at the SEC's website at WWW.SEC.GOV, or from
the companies' websites, at WWW.ASK.COM and WWW.IAC.COM, respectively.
Ask Jeeves, IAC and their respective officers and directors may be deemed
to be participants in the solicitation of proxies from Ask Jeeves stockholders
in connection with the proposed merger. A description of certain interests of
the directors and executive officers of Ask Jeeves is set forth in Ask Jeeves'
proxy statement for its 2004 annual meeting, which was filed with the SEC on
April 16, 2004. A description of certain interests of the directors and
executive officers of IAC is set forth in IAC's proxy statement for its 2004
annual meeting, which was filed with the SEC on April 29, 2004. Additional
information regarding the interests of such potential participants will be
included in the definitive proxy statement/prospectus and other relevant
documents to be filed with the SEC in connection with the proposed merger.
ADDITIONAL INFORMATION ABOUT THE IAC SPIN-OFF
In connection with the proposed spin-off it is currently expected that IAC
will file a proxy statement/prospectus with the Securities and Exchange
Commission (the "SEC"). Stockholders of IAC are urged to read the proxy
statement/prospectus, when it becomes available, because it will contain
important information about IAC, the proposed spin-off transaction and related
matters. Investors and security holders can obtain free copies of the proxy
statement/prospectus when it becomes available by contacting Investor Relations,
IAC/InterActiveCorp, Carnegie Hall Tower, 152 W. 57th Street, 42nd Floor, New
York, NY 10019 (Telephone: (212) 314-7400). Investors and security holders can
also obtain free copies of the proxy statement/prospectus and other documents
filed by IAC and Expedia with the SEC in connection with the proposed spin-off
transaction at the SEC's web site at www.sec.gov.
In addition to the proxy statement, IAC files annual, quarterly and current
reports, proxy statements and other information with the SEC, each of which
should be available at the SEC's web site at www.sec.gov. You may also read and
copy any reports, statements and other information filed by IAC at the SEC
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information.
IAC and its directors, executive officers and certain members of management
and other employees may be deemed to be participants in the solicitation of
proxies of IAC's stockholders to approve the proposed spin-off transaction. Such
individuals may have interests in the transaction as described herein, including
as a result of current holdings of options or shares of IAC's stock and future
holdings of options or shares of Expedia's stock, which will be impacted in the
transaction. Information regarding IAC and the equity interests of its directors
and officers who may be deemed to be participants in the solicitation of proxies
is contained in IAC's proxy statement, filed with the SEC on April 29, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IAC/INTERACTIVECORP
Dated: March 28, 2005 By /S/ GREGORY R. BLATT
---------------------------
Name: Gregory R. Blatt
Title: Senior Vice President
and General Counsel
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ---------------------------------------------------------------
99.1 Press Release, dated March 28, 2005, issued by IAC.