As many have expected, New IAC (NSDQ: IACI) will have a healthy balance sheet, with plenty of cash, while it looks like the spins will be shackled with debt. Yesterday's initial filing detailing the four IAC spins doesn't say what their balance sheets will look like post-spin, but as Lehman analyst Doug Anmuth points out in a note today, there are enough hints to figure out what's going on: "...HSN, Ticketmaster, and Interval are expected to take on debt and that the majority of cash will likely be transferred back to New IAC."
Take Ticketmaster for example: According to its historical balance sheet, it held $568 million in cash at the end of 2007, but it doesn't sound as though this cash will be available to it post-spin: "Ticketmaster's ability to fund its cash and capital needs will be affected by its ongoing ability to generate cash from operations, the overall capacity and terms of its financing arrangements as discussed above, and access to the equity markets." The language is basically the same with HSN and Interval, though beleaguered LendingTree may be seeded with some extra cash. And not only will Ticketmaster and its ilk be going into debt ("Ticketmaster intends to negotiate new credit facilities and potentially access the debt markets prior to its separation from IAC.") but it won't even get to keep the proceeds: "In each case, proceeds from this indebtedness (excluding the revolving credit facilities) will be distributed to IAC." Anmuth adds: "Excluding any significant disruptions in the debt and equity markets in the coming weeks, we believe that the spin-off is on track for 3Q08, likely July or August."
So as the spins plan to take on debt, IAC will keep the lion's share of the $1.4 billion in cash and cash equivalents currently on the balance sheet, plus whatever proceeds come from the debt, which means plenty of cash for Diller to make deals and seed home-grown startups. Of course, unlike with actual siblings, fair has nothing to do with it. And since it'll be the same pool of shareholders (initially) holding each company, it boils down to this: do shareholders want all of their cash controlled by Diller? Perhaps John Malone has some opinions on how that worked out.
By Joseph Weisenthal