IAC/InterActiveCorp and Ask Jeeves have announced they have signed an agreement under which IAC will purchase Ask Jeeves for $1.85 billion in stock. Under the terms of the agreement, IAC will issue 1.2668 shares of common stock for each share of Ask Jeeves common stock in a tax-free transaction valued at $1.85 billion net of cash acquired. ÊIAC intends to buy back through its previously authorized share repurchase programs at least 60% of the number of shares it will issue for this acquisition, thus effectively offsetting a substantial portion of the dilution from the transaction with cash. IAC expects the acquisition to be accretive to 2005 Adjusted EPS assuming the buyback at the 60% level. Ê
Barry Diller, Chairman and CEO of IAC, said, “Ask Jeeves was founded almost ten years ago based on the idea that simple text search results alone are not sufficient or satisfying - but, rather, that consumers want answers to questions - and questions posed in natural language and answered with spot-on accuracy were especially desired and appealing”.
He added: “Of the many search engines launched during that time, Ask was one of the very few that established itself… and we believe that in the future it has the potential to become one of the great brands on the Internet and beyond, and by beyond we mean in wireless, in the search for anything on any device. It is that belief, powered by IAC’s wealth of resources and thriving businesses, together with the continuing strong management of Steve Berkowitz and his team, that is the impetus for this transaction.”
The online advertising and search markets are growing rapidly; of the $260 billion in total U.S. advertising spend in 2004, less than $10 billion, or 4%, is online, with an expected annual growth rate of 13%. Search is now 36% of U.S. online advertising and expected to grow 24% per year over the next five years (Source: Merrill Lynch Equity Research.)
Ask Jeeves is one of four world-class search technology providers, with approximately 42 million U.S. unique monthly users, and is one of the largest generators of online advertising in the world.
IAC operates more than 40 specialized consumer brands in the travel, retailing, ticketing, personals, media, financial services, real estate and teleservices industries. IAC’s businesses are leaders in their respective categories and collectively reach 44 million U.S. unique users monthly.* ÊIAC enables billions of dollars in consumer-direct transactions for products and services sourced from more than 140,000 merchant partners, suppliers, vendors, venues, lenders, and real estate brokerages.
“Ask Jeeves is a pioneer in search and has grown to become one of the leading search providers through advanced technology and a suite of brands that are differentiated by both value proposition and delivery,” said Steve Berkowitz, CEO of Ask Jeeves, Inc. “Joining IAC will enable us to play on a much larger field. We are excited about the opportunity to serve as the connection between IAC’s constellation of leading online properties to share users and content. Ask Jeeves will now be in an even stronger position to aggressively grow market share.”
Ask Jeeves will remain an independent brand with operations headquartered in Oakland, Calif. following completion of the acquisition. Steve Berkowitz will continue as Ask Jeeves’ CEO. The transaction is subject to customary closing conditions, including regulatory approval and the approval of Ask Jeeves shareholders, and is expected to close late in the second quarter or early in the third quarter of 2005, prior to IAC’s spin-off of its travel businesses. ÊFollowing the spin-off, Ask Jeeves will remain part of IAC.