IAC/InterActiveCorp announced today that its Board of Directors has approved a plan to separate IAC into two publicly traded companies:
Expedia, which will include 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, TV Travel Shop, Expedia Corporate Travel, Classic Custom Vacations, and TripAdvisor; and

IAC, which will include the domestic and international operations associated with IAC’s 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; and Interval International.

IAC will retain the Company’s VUE securities, outstanding indebtedness and preferred stock obligations, as well as substantially the Company’s cash. Expedia will be appropriately capitalized.

Barry Diller will remain as Chairman and CEO of IAC. Mr. Diller will also serve as Chairman of Expedia and its senior executive; and Dara Khosrowshahi, who the company previously announced would become President and CEO of IAC Travel, will serve as CEO of Expedia. Victor Kaufman will remain as Vice Chairman of IAC and will also serve as Vice Chairman of Expedia.

Related to this announcement, Mr. Diller released a Letter to Shareholders (attached) outlining the background and rationale for this development.

The transaction is anticipated to take the form of a reclassification of IAC shares, with the holders of IAC stock receiving a proportionate amount of Expedia stock in a tax-free transaction.

It is contemplated that outstanding IAC stock options and restricted stock units held by IAC employees will be converted into options or restricted stock units of the company (either IAC or Expedia) with which each employee remains following the transaction. Appropriate adjustments will be made to all awards so that pre-transaction value will be maintained immediately following the transaction. Mr. Diller’s IAC stock options will be converted to options in both IAC and Expedia, with exercise prices adjusted on a proportional basis based on the relative trading value of each company following the close of the transaction. Mr. Kaufman’s outstanding equity will be treated the same as Mr. Diller’s.

The transaction is subject to a number of conditions including final approval by IAC’s Board of Directors of transaction specifics, receipt of a tax opinion of counsel and the filing and effectiveness of registration statements with the Securities and Exchange Commission. In addition, it is expected that IAC stockholder approval will be required. The proposed spin-off is expected to be completed in the second quarter of 2005.

IAC will audiocast a conference call with investors and analysts discussing the transaction on Tuesday, December 21, 2004, at 11:00 a.m. Eastern Time (ET). The live audiocast is open to the public at http://www.iac.com/investors.html.
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