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InterActiveCorp will split in two

Barry Diller decides that two companies make more sense than one online travel and e-commerce conglomerate.

InterActiveCorp plans to divide into two separate companies, disengaging its online travel operations from its other e-commerce interests.

The New York-based Internet conglomerate said Tuesday it will move its extensive online travel holdings, including reservation services Expedia.com, Hotels.com and Hotwire, into one venture, which will do business under the Expedia moniker.

The company's other operations, including its Ticketmaster business and online retailing divisions, will go forward under the name IAC.

The company said that media entrepreneur Barry Diller, its highly visible leader, will remain as chairman and chief executive of IAC and also serve in the role of chairman at Expedia. Dara Khosrowshahi, who was previously announced as the new president and chief executive of the firm's travel unit, will become CEO at Expedia. Victor Kaufman will remain as vice chairman of IAC and will fulfill the same role at Expedia.

In a letter to shareholders, Diller explained the reasoning behind the split, citing rapid growth in InterActiveCorp holdings such as Ticketmaster and online personal classifieds company Match.com, as well as the continued development of the company's travel interests. The executive also said the reality that InterActiveCorp has grown to be perceived primarily as a travel specialist has hurt its overall growth prospects.

"The result of our success in travel, and its present overweighting, is that IAC is viewed by the world as a travel company. While anyone who doubts that we love the travel business would be wrong, we've come to discover that this perception actually hinders the ability of our company to grow, both outside travel and inside of it," Diller said.

"For the company and our shareholders, these are negative consequences we want to correct. We had hoped that our natural progress over time would ameliorate this, but given the size of our travel business and the growth in travel we anticipate, we can't count on our ability to balance IAC by our own hand in the near future, either through acquisition or internally," Dillon added. "So I'm convinced, and our board is convinced, that separating IAC into two companies is the right course."

Under the terms of the deal, the transaction will consist of a reclassification of InterActiveCorp shares, with stockholders receiving a proportionate amount of Expedia stock in a tax-free transaction. InterActiveCorp said that any outstanding stock options held by its employees will be converted into options or restricted stock in whichever of the two new companies the employee remains with following the transaction. The deal remains subject to approval of the company's shareholders and has yet to receive final consent of InterActiveCorp's board of directors.

Based on the plan, the new IAC will be made up of Ticketmaster, ReserveAmerica, TicketWeb, MuseumTix.com, HSN, HSN.com, HSE 24, America's Store, 9Live, LendingTree, RealEstate.com, GetSmart, iNest, Domania, Citysearch, ServiceMagic, Evite, Match.com, uDate, Precision Response Corporation, Access Direct, Hancock Information Group and Interval International.

Expedia will be made up of Expedia.com, Hotels.com, Hotwire, TravelNow.com, Activity World, HotelDiscount.com, Condosaver.com, AllLuxuryHotels.com, Anyway.com, eLong, TV Travel Shop, Expedia Corporate Travel, Classic Custom Vacations and TripAdvisor.