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USA Interactive Bids for 3 Net Firms

E-commerce: Firm already owns majority stakes in Expedia, Ticketmaster and Hotels.com. Some shareholders sue, saying the offers are too low.

June 04, 2002|P.J. HUFFSTUTTER | TIMES STAFF WRITER

In an aggressive bet after the dot-com bust, the interactive unit of Barry Diller's media empire announced Monday a $4.5-billion plan to take over three Internet companies in its quest to become the world's largest e-commerce conglomerate.

The unsolicited offers for online travel agency Expedia Inc., online entertainment hub Ticketmaster Inc. and discount lodging firm Hotels.com expand USA Interactive Inc.'s push to take advantage of the stock market slump and snap up companies on the cheap.

USA already owns a majority stake in all three companies but wants to consolidate its control and buy out public shareholders. Some of those shareholders Monday sued USA and Diller, claiming the offers were far too low. A dozen lawsuits were filed in Delaware Chancery Court. One Ticketmaster shareholder accused Diller of trying to acquire the company "without paying an adequate or fair price."

Although USA's stock offer is valued at a 7.5% premium over Friday's closing prices for the companies, it is below the stocks' 52-week highs. The offers were made to the various management teams over the weekend. Executives with all three companies said they are examining the bids.

USA's push to pick up the trio of units is the latest in an aggressive shopping spree that has spanned the last few months. Diller recently spent $100 million in cash and stock for TV Travel Group Ltd. Last week, USA Interactive agreed to buy Interval Acquisition Corp., which books time-share vacations, for $578 million in stock and cash. Acquiring the Internet groups outright will allow USA to "begin acting in cohesive concert with all the parts of the enterprise," Diller said. It also could help prevent USA's investments from competing against one another. Although USA has kept Hotels.com and Expedia separate, for instance, the two have rival lodging businesses.

"The ideal scenario is to operate everything better together than they would separately," said e-commerce analyst Jonathan Gaw of research firm IDC. "You go to Expedia to buy a plane ticket, and then you'll need somewhere to stay and something to do while you're traveling. But the record for getting these elephants to dance together has been mixed."

Expedia--whose public shareholders own more than 45% of the company--and Ticketmaster--whose shareholders retain about 34%--each plan to form a committee to evaluate the offer. If the deals are accepted as is, USA Interactive would have to issue about 156 million new shares to complete the transaction.

Although the premium may appear to be generous, analysts predict that Diller will have to sweeten the offer.

"For all three of these companies, the bid is below both their year highs and their 52-week highs," said David Kathman, a stock analyst with the research firm Morningstar Inc.

Shareholders of Los Angeles-based Ticketmaster would receive about $22.99 a share in USA Interactive stock under this deal, which is below the 52-week high of $30 the stock hit in March. Holders of Dallas-based Hotels .com would get about $51.48 a share, compared with the high of $70.37 the stock hit in March. And stockholders of Bellevue, Wash.-based Expedia would expect about $76.86 a share, compared with the high of $84.65 in April.

On Monday, Expedia shares rose $2.13 to $73.63, Ticketmaster rose 56 cents to $21.95, Hotels.com rose $1.16 to $49.05, and USA Interactive fell $3.60 to $24.90, all on Nasdaq.

The news came soon after Vivendi Universal and USA Networks Inc. closed the merger of their entertainment assets, which were rolled into a new company controlled by Vivendi and run by Diller.

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Bloomberg News was used in compiling this report.

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