Liberty Media Takes Action To Force Diller Out of IAC
Liberty Media Corp. took steps Monday to seize control of IAC/InterActiveCorp from IAC Chairman Barry Diller. — Liberty, which owns a majority voting stake in IAC that has long been voted by Mr. Diller under a longstanding proxy agreement …
Context & Ripple Effects
The move lands three months after Barry Diller laid out plans to split IAC into five companies, a breakup premised on him remaining in command of the pieces. What made that command possible is precisely what Liberty is now attacking: Diller has long voted Liberty Media's majority stake in IAC through a longstanding proxy agreement, giving him control without economic ownership.
The escalation did not come out of nowhere. In early January Liberty signaled it preferred operating its internet assets directly, with reports that it was bulking up its Internet portfolio, including an unconfirmed move on sports-nutrition retailer Bodybuilding.com. Revoking Diller's proxy converts Liberty from silent majority holder to an active claimant on IAC's direction just as the company prepares to divide itself.
First-order effects
- Diller's effective voting control of IAC is directly threatened: if Liberty reclaims the proxy over its majority stake, he runs the company on sufferance rather than by right.
- IAC's five-way breakup plan now needs Liberty's acquiescence — a shareholder contest over control sits on top of the spinoff mechanics, with Ticketmaster among the assets caught in the middle.
Second-order effects
- How the proxy dispute resolves will shape who controls each spun-off company after the split, since voting rights inherited from IAC determine command of the successor entities.
- Liberty's parallel push to buy internet businesses outright shows it is prepared to hold and operate these assets itself rather than delegate through Diller, changing the negotiating leverage in any settlement.
Third-order effects
- If a proxy-voted supermajority can be revoked by the economic owner, similar operator-controls-everything-but-doesn't-own-the-votes arrangements across media holding companies become vulnerable to the same challenge.
- Conglomerate breakups increasingly double as governance contests between founding operators and their financial backers, with control of successor companies — not just the parent — as the prize.
The trend: As diversified internet-media holding companies break themselves apart, proxy arrangements that let operators control companies they do not economically own are becoming the first point of failure.