On March 10, 2025, IAC Inc. (NASDAQ: IAC, $43.94, Market Cap: $3.6 billion) announced the record and distribution date for the planned spin-off of its entire stake in ANGI Inc. (NASDAQ: ANGI, $1.56; Market Capitalization: $777.4 million). IAC’s board of directors plan to issue a special dividend of all Angi capital stock held by IAC to its stockholders. The spin-off will be effected through a pro rata distribution of 84.2% of the outstanding shares of Angi common stock to holders of IAC common stock.
The board of directors of Angi has approved a reverse stock split of its Class A and Class B common stock at a one-for-ten ratio, set to take effect on March 24, 2025. IAC will convert all its Angi Class B common stock to Class A on a one-for-one basis before the spin-off, after which it will not retain any Angi capital stock.
Post spin-off, IAC would continue operating its broader digital business portfolio via Dotdash Meredith’s publications such as People, Daily Beast, Food & Wine, search websites such as Ask.com & Reference.com, and Care services. On the other hand, ANGI will continue to be a leading platform for home services, helping users find and hire professionals for various home improvement tasks.
Earlier on January 13, 2025, IAC announced that its Board of Directors had approved a plan to spin off its entire stake in ANGI.
Spin-Off Details / Timeline
a) Record Date: The record date for the spin-off is March 25, 2025.
b) Spin-Off Ratio: The anticipated distribution ratio, based on shares held as of March 7, 2025, is approximately 0.5178 shares of Angi Class A common stock for each share of IAC stock, subject to change based on the number of shares outstanding on the record date. Fractional shares will not be distributed; IAC stockholders will receive a cash payment instead of fractional shares.
c) When-Issued Trading: Angi Class A Common Shares are expected to continue trading on NASDAQ under the ticker ANGI, with when issued trading tentatively scheduled to commence on NASDAQ from March 25, 2025, and will continue up to the distribution date. IAC Common Shares are expected to continue trading on NASDAQ under the ticker IAC, with ex-distribution trading expected to commence on NASDAQ from March 25, 2025, and will continue up to the distribution date.
d) Distribution Date: The spin-off’s distribution is set for March 31, 2025.
e) Regular-Way Trading: Angi Common Shares are expected to continue regular way trading on the NASDAQ under the symbol “ANGI” from April 01, 2025, the first trading day following the completion of the distribution. IAC Common Shares will continue to trade on a regular-way basis on the NASDAQ under the symbol “IAC.”
f) Exchange and Ticker: Post separation, IAC, and ANGI will continue to be listed on NASDAQ under the symbol ‘IAC’, and ‘ANGI’ respectively.
g) Tax Status: The transaction is intended to be tax-free for US federal income tax purposes.
We maintain our price target on IAC (Consolidated) of $46.00 per share and revise our rating to a HOLD from BUY amid share price volatility due to special dividend and reverse stock-split announcement. IAC offers a strong investment opportunity due to its diversified portfolio, robust digital advertising performance, and focus on high-margin segments like Dotdash Meredith. Key drivers include premium advertising rates, innovative ad targeting technologies, and strategic partnerships with OpenAI and Apple News+. Divesting ANGI would allow IAC to streamline operations and focus on higher-growth potential areas, leveraging its successful history of spin-offs. As for ANGI, we maintain our HOLD rating on the stock with a revised target price of $1.65 per share. ANGI faces issues around revenue decline due to reduced demand for home services amid inflation, rising interest rates, and a housing market slowdown. The Ads and Leads segment is also impacted as service providers cut back on advertising budgets. FCC regulations and execution risks in enhancing consumer experience add to revenue volatility, with headwinds expected to persist through early 2025. Our fair value for IAC (Stub) stands at $38.00 per share.
Deal Overview
On January 13, 2025, IAC, a prominent media and internet company, announced that its Board of Directors have approved the plan to spin off its entire stake in ANGI Inc., a leading digital marketplace for home services. IAC currently holds approximately 84.2% ownership in ANGI. The spin-off transaction will result in IAC and ANGI becoming wholly separate entities. Post spin-off, IAC will maintain its diverse range of digital businesses, including Dotdash Meredith’s publications like People, Daily Beast, Food & Wine, search websites such as Ask.com and Reference.com, and various care services. Meanwhile, ANGI will remain a top platform for home services, assisting users in finding and hiring professionals for different home improvement projects.
IAC is executing the spin-off in the form of one share/one vote common stock of ANGI, eliminating ANGI’s dual-class structure. The transaction is designed to be tax-free for US federal income tax purposes. The spin-off move is anticipated to allow both IAC and ANGI to concentrate on their respective business needs and strategies, with the potential for enhanced growth opportunities and capital allocation.
On February 6, 2025, the company approved certain amendments to Angi’s certificate of incorporation and a reverse stock split, set to take effect on March 24, 2025. ANGI plans to implement a reverse stock split at a ratio of one-for-ten, intended to occur prior to the distribution and independent of its completion. The reverse stock split aims to consolidate shares of Class A and Class B common stock, potentially affecting the stock’s marketability and shareholder equity.
In the latest press release on March 10, 2025, IAC disclosed the timeline for ANGI Separation. The record date for the spin-off is March 25, 2025, whereas the distribution is set for March 31, 2025. The expected distribution ratio, based on shares held as of March 7, 2025, is approximately 0.5178 shares of Angi Class A common stock for each share of IAC stock. This ratio is subject to change depending on the number of shares outstanding on the record date. Fractional shares will not be distributed; instead, IAC stockholders will receive a cash payment for any fractional shares. ANGI’s when-issued trading is tentatively expected to commence on March 25, 2025, which will continue up to the distribution date. IAC Common Shares are expected to commence ex-distribution trading on NASDAQ from March 25, 2025, and will continue up to the distribution date. Post separation, ANGI common stock is expected to commence regular way trading on the first trading day following the completion of the distribution. Post separation, IAC, and ANGI will continue to be listed on NASDAQ under the symbol ‘IAC’, and ‘ANGI’ respectively.
Currently, IAC is undergoing leadership restructuring. Joey Levin, who has served as IAC’s CEO, is set to become an advisor to the company. Levin has also been appointed as the Executive Chairman of ANGI, where he will work closely with ANGI’s CEO, Jeff Kip. This move aims to provide ANGI with greater independence and flexibility for growth through M&A, capital formation, and talent acquisition. Meanwhile, IAC will not be appointing a new CEO, with key executives reporting directly to Barry Diller, Senior Executive and Chairman.
Carve-Out Details (ANGI HomeServices)
Earlier, on September 29, 2017, ANGI HomeServices completed the acquisition of Angie’s List by way of a merger of its subsidiary Casa Merger Sub, Inc. with and into Angie’s List, with Angie’s List surviving the merger as a wholly owned subsidiary of ANGI HomeServices. Accordingly, Angie’s List common stock was delisted from NASDAQ effective September 29, 2017. Beginning October 2, 2017, ANGI HomeServices started trading under the symbol “ANGI”.
Deal Rationale
IAC has a long-standing strategy of evaluating its portfolio and spinning off businesses that have reached a significant scale and maturity. This approach allows IAC to unlock value and focus on new growth opportunities. In its long history as a publicly listed company, IAC has spun-off many businesses including Vimeo, Match Group, Lending Tree, HSN and Interval Leisure Group, amongst others. Most recently, IAC announced plans to spin off its full stake in Angi, a leading platform for home services, to IAC shareholders. IAC currently holds approximately 84.2% ownership in Angi.
The separately listed Angi, formed after IAC merged Angie’s List with HomeAdvisor in May 2017, makes up about a third of the digital media holding company’s revenue. However, the company has been grappling with declining revenues, shrinking margins, and operational difficulties, as evidenced by its 3QFY24 results. ANGI’s 3QFY24 results revealed a consolidated revenue drop of over 15.0% YoY driven by weak performance in its US Services segment. The decline was despite a resilient international segment, particularly in Europe, showing a 15.0% YoY revenue increase, supported by strong demand for home services and digital marketplace adoption. Revenue from the Ads and Leads segment declined by 10.0% YoY, as macroeconomic pressures and reduced consumer spending impacted advertising budgets. The online marketplace has suffered as tradespeople have cut back on advertising spending. The challenges faced by Angi highlight the broader struggles of digital marketplaces and home services platforms in a volatile economic environment.
Additionally, the company’s transition to a consumer choice model, influenced by Federal Communications Commission (FCC) regulations, is expected to further disrupt revenue streams in the short term. This model empowers consumers by giving them more control over the services they receive, which could enhance satisfaction and loyalty over time. However, the company will need to adjust its pricing and service offerings along with significant operational changes which can be costly and time consuming. Also, the company faces intense competition from platforms like Google, Thumbtack, and HomeAdvisor, making market share gains difficult. These platforms have substantial resources and brand recognition, making it difficult for Angi to differentiate itself and capture a larger share of the market.
The potential spinoff of ANGI from IAC is seen as a strategic move to declutter IAC’s portfolio and provide a clearer focus on its remaining assets. A simplified IAC is also expected to benefit from an enhanced ability to use its stock to make acquisitions and incentivize employees. As a fully independent company, Angi is expected to benefit from a more attractive equity currency to accelerate growth, whether through M&A, capital formation or talent acquisition. As a result of the spin-off, each of IAC and Angi is expected to benefit from the ability to allocate its resources to meet the unique needs of its respective business and to implement its optimal capital structure tailored to its strategy and business needs.
Additionally, the elimination of Angi’s dual-class structure and conversion to one share/one vote common stock will significantly enhance corporate governance and potentially improve market valuation. The elimination of the dual-class structure should also reduce the holding company discount typically applied to IAC’s valuation.
Investment Thesis
Dotdash Media to benefit from efficient resource allocation
Dotdash Meredith, a key subsidiary of IAC, has demonstrated strong performance in the digital advertising sector driven by higher premium advertising rates from sectors like beauty, technology, pharmaceuticals, and retail. The company has seen a 30% increase in programmatic advertising rates, contributing significantly to its revenue growth. This was further aided by innovative ad targeting technologies and strategic partnerships. Dotdash Meredith launched D/Cipher, a groundbreaking intent-targeting tool that connects advertisers to consumers at key moments of intent without relying on cookies. This tool has been instrumental in driving higher engagement and better ad performance. By shedding ANGI, which has faced revenue declines, IAC can concentrate on areas like Dotdash Media with higher margins and growth potential.
Licensing and Partnerships to add high-margin revenue streams
Dotdash Meredith has strategically leveraged licensing and partnerships to enhance its revenue streams, particularly focusing on high-margin opportunities. It has entered a strategic partnership with OpenAI, which involves integrating its trusted content into ChatGPT. This includes content from iconic brands like PEOPLE, Better Homes & Gardens, FOOD & WINE, Verywell, InStyle, and Investopedia. These partnerships not only enhance revenue but also contribute to higher margins, as they involve leveraging existing content and technology infrastructure.
Care.com to grow even amid economic challenges
The broader healthcare and caregiving market has demonstrated strong growth potential. For instance, the UK care market, which shares similarities with Care.com’s operational environment, reported improved occupancy levels and fee growth in 2024, with private pay fees increasing by 10%. Care.com’s platform, which connects families with caregivers, is well-positioned to capitalize on the growing demand for caregiving services, driven by demographic shifts and an aging population, particularly in private pay segments, which are less susceptible to economic downturns. The resilience of the sector, even amid economic challenges, highlights the platform’s potential to contribute significantly to IAC’s long-term growth.
ANGI (Spin-Off Entity)
Home services platforms to remain under pressure in a volatile economic environment The US Services segment, which is a core revenue driver for Angi, experienced a significant decline, contributing to the overall 15% YoY drop in consolidated revenue. This segment’s underperformance reflects reduced demand for home services in the US market, likely due to macroeconomic pressures such as inflation, rising interest rates, and a slowdown in the housing market. Homeowners are deferring non-essential home improvement projects due to tighter budgets, which directly impacts Angi’s business model, as it relies on connecting homeowners with service providers.
Macroeconomic pressures impact advertising budgets and spending
Inflation and economic uncertainty have led to reduced discretionary spending among consumers. This has a cascading effect on Angi’s Ads and Leads segment, which saw a 10% YoY revenue decline. As consumers cut back on home improvement projects, service providers (tradespeople) are also reducing their advertising budgets on platforms like Angi. Tradespeople, who are key customers for Angi’s Ads and Leads segment, are scaling back on paid advertising due to lower demand for their services. This creates a negative feedback loop: fewer leads for service providers result in less willingness to spend on advertising, further reducing Angi’s revenue.
FCC regulations creating additional friction to revenue streams
The company’s transition to a consumer choice model, influenced by Federal Communications Commission (FCC) regulations, has introduced significant revenue volatility. The FCC’s one-on-one consent rule, which requires explicit consumer consent for marketing communications, is expected to further strain revenue in the short term as businesses adapt to the new regulatory framework. This rule could limit Angi’s ability to generate leads through traditional outbound marketing strategies, creating additional friction in its revenue generation process. However, the anticipated benefits from the FCC’s one-on-one consent rule and Angi’s ability to capitalize on the new landscape post-order could provide a competitive advantage, contributing to earnings growth in the long-term.
Customer Satisfaction and Retention remains a key risk area
Angi has made progress in improving customer satisfaction and retention with a 30% YoY increase in jobs done well over the past year, indicating that its efforts to enhance service quality and customer experience are yielding positive results. However, maintaining this momentum is fraught with execution risks. While existing customers may be satisfied, attracting new users and retaining them remains a significant challenge. Also, dependency on consumer satisfaction and retention for profitability suggests execution risks in improving consumer experience, which could affect future net margins and earnings if not managed effectively.
Valuation
IAC (Stub Entity)
IAC presents a compelling investment opportunity due to its diversified portfolio, strong performance in advertising, and strategic focus on high-margin segments. Its key subsidiary, Dotdash Meredith has benefited from higher premium advertising rates, particularly from sectors like beauty, technology, pharmaceuticals, and retail. Innovative ad targeting technologies, such as the D/Cipher tool, have enhanced ad targeting without relying on cookies, further boosting operational performance. Strategic partnerships with companies like OpenAI and syndication partners such as Apple News+ have also played a crucial role in boosting licensing and other revenue streams. We believe, by divesting ANGI, IAC can concentrate on higher-margin areas like Dotdash Meredith, allowing the company to streamline operations and focus on segments with greater growth potential. Additionally, IAC’s history of successful spin offs, such as Match Group and Vimeo, demonstrates its ability to unlock value and foster growth.
We compare IAC with listed companies engaged in the Internet Media and Services business such as Ziff Davis, Inc, News Corporation, Lyft, Inc, Gannett Co., Inc., Bright Horizons Family Solutions Inc., Yelp Inc., Porch Group, Inc., Groupon Inc., QuinStreet and Frontdoor. Considering the anticipated potential improvement in operations as IAC streamlines its operations in a more effective manner, we value IAC at EV/EBITDA (x) of 12.5x (peer median: 10.4x) and EV/Sales (x) multiple of 1.7x (peer median: 1.6x) to arrive at an average enterprise value of $4.0 billion. Further, we deduct net debt of ~$0.8 billion to arrive at an implied equity value of $3.2 billion. We consider the diluted shares outstanding of ~83.1 million and arrive at a per share fair value estimate of $38.0 for the Stub Entity.
ANGI (Spin-Off Entity)
ANGI continues to see a revenue drop due to reduced demand for home services amid inflation, rising interest rates, and a housing market slowdown. This decline reflects homeowners deferring non-essential projects, impacting Angi’s business model. The Ads and Leads segment also faces a revenue decline as service providers cut back on advertising budgets due to lower demand. FCC regulations, which require explicit consumer consent for marketing communications is likely to keep revenues volatile. While Angi has improved customer satisfaction and retention with improvement in the jobs done well metric, maintaining this momentum and attracting new users remains challenging. Execution risks in enhancing consumer experience could affect future profitability if not managed effectively. Angi expects revenue headwinds to persist through early 2025, with volatility from the FCC consent rule. Additionally, FY25E estimate cuts and limited visibility around Angi’s return to growth remains a key monitorable. We compare ANGI with listed companies such as Yelp Inc., Porch Group, Inc., Groupon Inc., QuinStreet and Frontdoor, Inc. Given the continued volatility and concerns around FY25E growth figures, we ascribe an EV/EBITDA (x) of 6.5x (lower than peer median: 10.7x) and EV/Sales (x) multiple of 0.8x (peer median: 0.9x) to arrive at an average enterprise value of $916 million. Further, we deduct net debt of ~$84 million to arrive at an implied equity value of $832 million. Considering the diluted shares outstanding of ~507 million, our revised target price stands at $1.65. We maintain our HOLD rating on ANGI. On March 10, 2025, the board of directors of ANGI approved a reverse stock split of its Class A and Class B common stock at a one for-ten ratio, set to take effect on March 24, 2025. Considering the revised share count of 50.7 million, we arrive at a price target of $16.5 per share, applicable once the corporate action takes place.
IAC (Consolidated Entity)
We add ANGI’s 84.2% equity value of $703.0 million to the IAC Stub’s implied equity value of $3.2 billion to arrive at a consolidated value of $3.9 billion. When divided by 83.1 million shares outstanding of IAC, our target price for IAC (Consolidated) remains unchanged at $46.00 per share. Considering the surge in stock price amid announcement of a special dividend, we revise our rating to a HOLD on IAC (Consolidated Entity).
Company Description
IAC Inc. (IAC)
IAC Inc. is a diversified holding company that operates a wide range of businesses in the media, internet, and technology sectors. Founded in 1995 and headquartered in New York City, IAC (NASDAQ: IAC) has grown through numerous acquisitions and divestitures, positioning itself as a leader in the digital economy. The company owns and operates category-leading businesses such as Angi Inc., Dotdash Meredith, and Care.com, among others. The company operates through Dotdash Meredith, Search, and Emerging & Other segments.
Angi Inc. (ANGI)
Incorporated in 2017 and headquartered in Denver, Colorado, Angi (NASDAQ: ANGI) is a leading digital marketplace that connects consumers with home service professionals across approximately 500 categories, including home repair, remodeling, cleaning, and landscaping. Operating under well-known brands such as Angi, HomeAdvisor, and Handy, the company facilitates seamless interactions between homeowners and service providers, ensuring efficient and effective completion of home projects.
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