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Malone-Diller court battle set in dispute over IAC breakup

February 02, 2008|From Bloomberg News

A Delaware judge Friday set a trial in March for Liberty Media Corp.'s billionaire Chairman John Malone to face off with IAC/InterActiveCorp Chairman Barry Diller in a battle to control the entertainment company.

Chancery Court Judge Stephen Lamb consolidated lawsuits filed over IAC's plans to split into five companies and set a timetable for trial. He postponed ruling on Liberty's request to bar the spinoffs until the suits were resolved.

Malone opposes Diller's plan to split IAC without maintaining a stock structure that gives Liberty control. Liberty holds 30% of IAC's shares and 62% of its voting power. Liberty claims that Diller, who controls the voting rights of Liberty's IAC shares through a proxy agreement, is contractually obligated to vote against the spinoff proposal.

"There can't be any question that he was skating close to the edge" of his authority, Lamb said of Diller. The judge said he wasn't interested, at this point, in hearing arguments on the merits of the case.

Malone, who voted to approve the spinoffs, wants to preserve Liberty's current voting power in the new entities. Diller has said he would vote in favor of the proposed structure.

Diller, 65, and Malone, 66, have worked together since Diller's 1995 investment in Malone's Silver King Communications. Their relationship crumbled after a Jan. 16 IAC board meeting at which Diller proposed the single-tiered voting structure for the spinoffs.

IAC claimed in a Jan. 23 court filing that Liberty threatened to block the breakup unless the deal was structured to give it control of the new companies.

Liberty sued the next day, accusing IAC of attempting to wrest control of the companies in what amounted to a "corporate coup," according to its Jan. 24 complaint.

IAC shares rose 35 cents to $26.29. Liberty Interactive, the tracking stock for QVC and other Liberty shopping units, gained 53 cents to $16.44.

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