The lawsuit is one in a recent series and stems from a move IAC made two months ago, when it proposed splitting itself into five separate, publicly traded companies: Ticketmaster; Lending Tree; home-shopping business HSN; time-share travel business Interval International; and a heavily ad-supported IAC that would be anchored by Ask.com.
The way Mr. Diller structured the split, Liberty would lose its high-vote stock in the transaction, dramatically reducing its influence over the companies. Liberty is calling the move "a corporate coup."
Who's in control
Liberty Media already owns a controlling stake in IAC, but Mr. Diller has held voting rights for the Liberty-owned shares, thanks to a governance agreement between himself and Liberty.
IAC asked a Delaware court last Wednesday to confirm that the spinoff could in fact take place. The following day, Liberty sued IAC to derail the plan.
In the latest suit, filed Jan. 28 and first reported by The Wall Street Journal, Liberty alleges that Mr. Diller has long resented Liberty designees on his board and that at about the time Liberty became concerned about IAC's floundering stock price and executive compensation, Mr. Diller's priorities shifted to his succession legacy and monetizing his interest in IAC without giving up his control. IAC's stock price, which flirted with $40 a year ago, is around $25.
IAC general counsel Greg Blatt fired back in a statement: "Upon reading this latest complaint, it seems Liberty has gotten truly desperate. The only action IAC has taken is to proactively go to the Delaware courts to ask it to confirm IAC's rights, and how that could be a breach of anything is beyond comprehension."
A statement on the lawsuit issued by an IAC spokeswoman said: "Last night Liberty Media took the extraordinary action of attempting to claim control of the voting power of IAC and replacing a majority of its directors. The action is preposterous. Liberty does not control IAC. Barry Diller continues to be the chairman-CEO of IAC; the board of directors of IAC elected at last summer's stockholders meeting continues to manage the affairs of the company; and IAC management continues to work in the best interest of its stockholders toward consummation of the previously announced transactions in which it will separate into five public companies."
Following a description of the chain of events leading to the action, the statement says: "Liberty has now gone off the deep end, not only alleging that Mr. Diller has somehow materially breached his proxy by which he has voted Liberty's IAC shares for over 12 years but also purporting to unilaterally throw out the incumbent directors and installing its own slate.
"Regardless of whether IAC and Mr. Diller are correct about their rights to effect a single-class voting structure in the spinoffs, which they are confident they are, the contention that Liberty is now in control of the company is inexplicable. Nothing has happened yet. No board has decided anything. No shareholders have voted (or been asked to vote) on anything. No agreements have been signed. The requisite filings have not been made with the SEC. No transactions have been consummated. Even after reading the various complaints repeatedly, Liberty's theory that it now controls IAC is incomprehensible."