On Monday, Vivendi confirmed that it would buy USA Networks' entertainment unit, which includes the company's cable network, the Sci-Fi Channel, a film company and TV production unit in a deal valued at $10.3 billion.
Once that deal closes, USA Interactive will be focused solely on interactive commerce. USA Networks CEO Barry Diller has been amassing a stable of e-commerce players such as Ticketmaster to complement his Home Shopping Network.
USA Interactive will include HSN.com, Ticketmaster.com, Match.com, Hotel Reservations Network and Expedia. In July, USA Networks announced plans to acquire Microsoft's stake in Expedia.
Expedia said Monday that it would postpone a shareholder vote on the USA Networks deal. It also said it would present updated information to shareholders at a special meeting in early 2002. Analysts said the company is likely to pursue more acquisitions in online commerce.
The company said it would have $4 billion in cash to pursue acquisitions, adding that it would pursue a series of smaller deals instead of one big acquisition.
Diller said USA Networks is talking to more than a dozen Internet companies about acquisitions, noting that "there's a great deal of opportunity out there."
Diller, who will be chairman and CEO of the new Vivendi-USA Networks joint venture, will also head the new USA Interactive. Most of Diller's equity compensation will reside with the success of USA Interactive, but he does hold a minority interest in Vivendi.
Diller told analysts on a conference call that he will be able to juggle both roles, but noted there will be "no precision" on how things will be divided between the two companies. Diller said he was upbeat about USA Interactive's prospects.
"The great good luck of being able to have a company in all these interactive areas--so well-funded, so strong and independent, at just the time of so much opportunity--gives us a great chance to dominate a business sector that will undoubtedly become one of the most important in the world," he said.
USA Interactive will boast $4.3 billion in pro forma revenue and $620 million in pro forma earnings before interest taxes depreciation and amortization (EBITDA) for 2002, the company said.
As result of the Vivendi transaction, USA Interactive will have corporate autonomy. Currently, Vivendi has veto power over transactions in excess of 10 percent of USA Networks' market cap. Once that veto power is removed, USA Interactive will have a much easier time making acquisitions.
According to Thomas Weisel analyst Gordon Hodge, USA Interactive is likely to gobble up a host of Internet companies. "We believe the potential for future interactive media acquisitions would be one of the most attractive and interesting aspects of a deal," Hodge wrote in a research note, adding that USA Interactive will "become a leader among pure-play interactive transactional media companies."
Hodge estimated that USA Interactive's holdings in Ticketmaster.com, Expedia and the Hotel Reservation Network are worth $4.6 billion at current market prices.
USA Interactive will be able to grow at a much faster clip than before, Hodge said. Supplemental financial information provided Monday by USA Interactive shows the company projecting healthy growth rates for EBITDA and revenue through 2003.
The company is projecting that its hotel reservations will show the strongest growth, coming in with sales growth of 37 percent for 2002, and 40 percent in 2003. Ticketing growth is the lowest, projected to be up 7 percent in 2002, and 10 percent for 2003. The company is projecting revenue of $5.17 billion for 2003.