Exhibit 99.2
Filed by IAC/InterActiveCorp
Pursuant to Rule 425
Under the Securities Act of 1933
Deemed filed and Rule 14a-12
Under the Securities Exchange Act of 1934
Commission File No. 0-20570
[IAC/INTERACTIVECORP LOGO]
LETTER TO SHAREHOLDERS
This letter is intended to explain and give context to our actions. We believe
greater value can be created in the configuration we announce today than any
other, and from this all else flows. This is entirely an elective...there is
nothing else that pushed us, no transaction, no inherent worry that led us to
take this course at this time.
In the nine years since the creation of IAC, we have acquired and built a great
collection of businesses, in categories comprising the lion's share of
interactive commerce, each business with its own compelling story of success and
growth. In a way you could say we are the victims of our own success. HSN,
Ticketmaster, and Match.com, for example, have each grown very substantially
since we acquired them. And, while still embryonic, our Financial Services and
Local businesses - including LendingTree, RealEstate.com, Citysearch,
ServiceMagic, Entertainment Publications, and Evite -- are poised for similar
great growth.
One of our most compelling successes has been our travel business, which started
in 1999 with our small acquisition of Hotel Reservations Network (now, of
course, Hotels.com), followed in 2001 by our acquisition of a controlling
interest in Expedia when that business was a fraction of its current size. Those
businesses have had tremendous growth...to the point where they now represent
over 50% of IAC's earnings, and dwarf each of our other operations. Many of
those, standing on their own, have real import and significance but are
considered irrelevant in the current construct.
The result of our success in travel, and its present overweighting, is that IAC
is viewed by the world as a Travel Company. While anyone who doubts that we love
the travel business would be wrong, we've come to discover that this perception
actually hinders the ability of our company to grow, both outside travel and
inside of it. Outside travel, it hinders growth through acquisition because
non-travel companies generally don't want to accept what they view as a travel
stock. Inside travel, acquisition growth, already hindered without a pure travel
currency, would amplify IAC's imbalance, making it even harder for us to grow
outside of travel.
For the company and our shareholders these are negative consequences we want to
correct. We had hoped that our natural progress over time would ameliorate this,
but
given the size of our travel business and the growth in travel we anticipate, we
can't count on our ability to 'balance' IAC by our own hand in the near future,
either through acquisition or internally.
So I'm convinced, and our Board is convinced, that separating IAC into two
companies is the right course...
EXPEDIA will be large and growing, the world's leading online travel company
with the mission of becoming the largest provider of travel in the world.
Expedia will generate significant cash and have its own security, enabling it to
participate with full flexibility in the ongoing evolution and likely
consolidation in the travel category.
The online travel business has grown and matured since we entered it, with the
concomitant attraction of strong competitors ... horizontal, vertical, and the
new word 'meta.' This of course brings a variety of challenges, along with great
opportunities, as the matrix of relationships among suppliers, intermediaries,
distributors and consumers works itself out. It requires complete focus and
nimbleness to maneuver in this environment, along with the flexibility that
comes from a pure currency. In the new configuration, Expedia will have the
chance to grow every which way, according only to the demands of the marketplace
it serves, without any of the gating concerns that are inherent in being part of
IAC. Our travel business, with the leadership positions it has built in the U.S.
and internationally, is in an incredibly strong position to meet these
substantial challenges and opportunities...and it will be best served unleashed
and empowered as a stand-alone entity.
IAC, post-transaction, will be a diversified interactive commerce company, with
a mix of established and embryonic businesses, united by a spirit of opportunism
and entrepreneurship. IAC will be excellently capitalized and perfectly
positioned not only to grow its existing businesses, but to identify and pursue
young or underappreciated interactive companies with strong growth
potential...something our history shows is one of our real attributes.
We don't believe the interactive revolution is over, to say the least; we
believe big opportunities will continue to be available to companies and
management teams able to spot real potential for growth and seize it, and that
playing with one hand tied behind our back as the next phase of internet growth
and convergence unfolds would be intolerable.
This transaction really is a simplifying event. Expedia will become a very
straightforward company post-transaction, and I believe in that configuration
its size and dominance will be much more positively seen than currently. For
IAC, our complexity would be reduced and our clarity as a balanced and
diversified interactive commerce company will come through - until of course, we
again happily find a business whose growth and dominance in a category far
outweighs all else, and then the entity and our shareholders are best served for
it to be set free.
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At both IAC and Expedia, the result of the split will be closer alignment of
employee performance and shareholder returns, which we believe will energize
both sets of employees.
And at both IAC and Expedia, I couldn't be more enthusiastic about the key
leaders and their talents. Dara Khosrowshahi is perfectly suited to be the CEO
of Expedia the public company; and he has a superb collection of managers, as
IAC has a similar group of great talent.
At both companies we'll continue to take every advantage from the collection of
businesses under each roof - people movement; exchanging best practices and
lessons learned; cost savings from strategic sourcing and other initiatives;
sharing traffic and other beneficial inter-company arrangements. We've made real
progress here since the buy-in of our public subsidiaries one and one-half years
ago...and over time I have no doubt that we'd see more and more benefit from
cross-company activities. In finalizing the split, we'll preserve, as much as we
practically can, the benefits of the interrelationships between the IAC
businesses and the Expedia businesses. We do intend to put in place strong
commercial relationships between IAC and Expedia, and yes, some of the easy
benefits of operating as one enterprise will be given up, but we believe the
advantages of separation far outweigh all else.
Another benefit of the transaction is that our current and prospective
shareholders will get enhanced visibility into both companies. I imagine that
some hearing today's news may wonder whether the split of the companies is
simply an elegant (or not so elegant) casting away of our travel businesses as
the competition in that sector increases. I can tell you my answer directly: it
is not. And believing as strongly as I do in the prospects of both companies, my
equity holdings will be treated the same as that of our shareholders and will be
split proportionately between the two companies, with each company ultimately
representing a very substantial portion of what I have worked long and hard to
accumulate. Finally, I intend to be a most active Chairman at Expedia, in
addition to serving as both Chairman and CEO of IAC...people who would worry
about 'how my time is divided' should understand that with my equity balanced
and given my current daily involvement in all of IAC's current businesses, this
transaction ought to provide enhanced focus on each entity - and I'm very
excited and energized by the opportunities in both.
With apologies to making any claim, one of the defining attributes of IAC, since
the beginning, has been a refusal to be constrained by conventional
wisdom...believing instead that a willingness to change - to 'turn on a dime' --
without being hostage to the past or any other consideration where we see
opportunity, is a great way to create great value.
Separating the Company into two businesses will allow IAC to do what it does
best, and Expedia to pursue its pure mission as a travel company. It is, I
believe, exactly the right move at this moment in our history and evolution.
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Often the most obvious solutions are elusive, and this one came upon us, first
as a revelation that instinctively seemed just right - both freeing and
energizing, followed by an intensive examination to find any flaw - and then,
after finding none, a great desire to get on with it. Now, having made the
announcement in the ending days of 2004, all my colleagues will be organizing
themselves to start the new year with a fresh, clear and invigorating mandate
for the future - as good a holiday present as we could hope to give to ourselves
and our shareholders.
Barry Diller
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release 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, and similar matters, and/or statements preceded
by, followed by or that include the words "expects," "anticipates,"
"contemplates," "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 the risks inherent in separating Expedia from IAC;
costs related to the proposed transaction; changes in business, political, and
economic conditions due to the threat of future terrorist activity or otherwise;
future regulatory and legislative actions and conditions affecting our operating
areas; actions and initiatives by current and potential competitors; the ability
to expand into and successfully operate in international markets, and other
risks described in IAC's filings with the Securities and Exchange Commission
(the "SEC). Other unknown or unpredictable factors also could have material
adverse effects on IAC's and Expedia's future results, performance or
achievements. In light of these risks, uncertainties, assumptions and factors,
the forward-looking events discussed in this press release 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 press release.
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 press release to reflect circumstances existing after the date of this
press release 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
In connection with the proposed spin-off it is currently expected that IAC will
file a proxy statement/prospectus with 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
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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.
As filed with the SEC December 21, 2004.
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