IAC's HomeAdvisor to combine with Angie's List
IAC (NASDAQ: IAC) and Angie's List, Inc. (NASDAQ: ANGI) today announced they have entered into a definitive agreement to combine IAC's HomeAdvisor and Angie's List into a new publicly-traded company, to be called ANGI Homeservices Inc. The combined business, which will maintain both Angie's List and HomeAdvisor brands, will offer unparalleled scale and product breadth to match homeowners with service professionals in the $400 billion domestic home services market. The transaction has been approved by the Boards of Directors of both companies, and is expected to close in the fourth quarter of 2017.
"This is now the 10th publicly traded company to emerge from what was one company, in 1995, with $48 million in sales and a market capitalization of $201 million - the beginning of IAC. Today, the equity value of the companies created is in excess of $43 billion, with a compounded annual return of 13.3 percent. While it's hard to predict the future, I think we'll just keep going," said Barry Diller, Chairman of IAC and Expedia, Inc.
Under the terms of the agreement, Angie's List stockholders will have the right to elect to receive either one share of Class A common stock of ANGI Homeservices Inc. or $8.50 per share in cash, for each share of Angie's List stock that they own, with the total amount of cash available in the transaction capped at $130 million. Depending upon the number of Angie's List stockholders electing to receive cash, upon completion of the transaction, IAC will own between approximately 87 percent and approximately 90 percent of the equity value of the combined company.
The transaction combines the power of Angie's List's well-known brand and large audience with IAC's home services category leader HomeAdvisor. HomeAdvisor has the industry's largest network of paying, high quality service professionals and a consumer product driving seven consecutive quarters of domestic revenue growth in excess of 35 percent. The combined company will have a target five-year compound annual growth rate of revenue of 20 to 25 percent, and a target Adjusted EBITDA margin that will ramp to approximately 35 percent.
HomeAdvisor CEO Chris Terrill will assume the role of CEO of ANGI Homeservices Inc., whose headquarters will be based out of HomeAdvisor's Golden, Colorado location. IAC CEO Joey Levin will also serve as Chairman of the Board of Directors. Thomas R. Evans, current Chairman of the Board of Directors of Angie's List, and Angie Hicks, Angie's List co-founder and CMO, are expected to join the board of ANGI Homeservices Inc.
Key benefits of the combination include:
- Scale: Homeowners will be able to tap into North America's largest combined network of active, high quality service professionals between HomeAdvisor's network of more than 156,000 and Angie's List's network of more than 55,000, collectively up 24 percent year-over-year as of the first quarter of 2017.
- Product innovation: HomeAdvisor's state of the art technology and products - including Instant Booking and Instant Connect - will enhance the experience for the more than 22 million monthly users visiting both HomeAdvisor and Angie's List today.
- Monetization: The combination of Angie's List's nationally-recognized brand and directory monetization model with HomeAdvisor's performance-based on demand marketplace will provide a world class experience to the largest numbers of homeowners and service providers alike. Applying HomeAdvisor's existing operating model to Angie's List's direct audience will help drive incremental jobs to the combined service professional network and increase combined revenue.
- Growth: HomeAdvisor can accelerate growth with a giant leap in scale on both the supply and demand side of the home services marketplace, driving further innovation, customer satisfaction and deeper penetration in a fast growing - but relatively immature - market.
- Synergies: By the end of 2018, management expects to fully implement $100 to $250 million of annualized synergies.
"Both Angie's List and HomeAdvisor have built impressive businesses based on delivering homeowners and home service professionals incredible value," said Chris Terrill, CEO of HomeAdvisor. "We've only just scratched the surface of this tremendous market opportunity, given 90 percent of home improvement transactions are still generated via word-of-mouth. By combining HomeAdvisor and Angie's List's complementary strengths, the combined company will be able to leverage its joint models and resources to not only accelerate market penetration, but also continued online conversion of that marketplace."
Said Thomas R. Evans, Chairman of Angie's List, "After completing our comprehensive strategic review, we have found a true partner in IAC and HomeAdvisor that we believe will create tremendous shareholder value for Angie's List. Together, we uniquely benefit from the powerful combination of two market leaders, who, by joining forces, can drive incredible innovation, customer satisfaction and category growth."
"Since 1995, Angie's List has set the bar for enabling quality home services experiences for millions of consumers and service pros. I'm thrilled that IAC and HomeAdvisor share our vision for what's possible when it comes to the home services category's massive potential," said Angie Hicks, co-founder and CMO of Angie's List. "Together, we will relentlessly elevate home services experiences for an even broader base of customers."
"This transaction not only cements our category leadership, it also unlocks the value embedded in HomeAdvisor by effectively making HomeAdvisor public for the first time, joining the ranks of Match, Expedia, Ticketmaster, and others," said Joey Levin, CEO of IAC. "We love these category leaders in big consumer verticals where we can ride an obvious offline to online migration with winning products and multiple brands. We did it in dating, travel, and ticketing, and we expect we'll do the same with home services."
Under the terms of the merger agreement, Angie's List will merge with a subsidiary of ANGI Homeservices Inc. In the merger, Angie's List stockholders may elect to receive, in exchange for each share of Angie's List owned, either one share of ANGI Homeservices Inc. Class A common stock, or $8.50 in cash. Elections by Angie's List stockholders will be subject to proration to the extent the total number of stockholders electing to receive cash would result in payment of more than $130 million. The ANGI Homeservices Inc. Class A common stock issued in the merger will possess one vote per share and is expected to be listed for trading on Nasdaq at closing of the transaction. ANGI Homeservices Inc. will also issue shares of Class B common stock, possessing 10 votes per share, to IAC in exchange for the contribution by IAC of HomeAdvisor. Upon closing of the transaction, depending upon the number of Angie's List stockholders electing to receive cash, IAC will hold between approximately 87 percent and approximately 90 percent of the combined company's equity value and approximately 98 percent of the total voting power, and former Angie's List stockholders will hold equity in the combined company representing between approximately 13 percent and approximately 10 percent of the combined company's equity value. IAC will designate a majority of the initial members of the Board of Directors of the combined company. The transaction, which is subject to the satisfaction of customary closing conditions, including regulatory approvals and the approval by Angie's List stockholders, is expected to close in the fourth quarter of 2017.
J.P. Morgan Securities LLC acted as financial advisor to IAC and HomeAdvisor, and Wachtell Lipton Rosen & Katz LLP acted as legal counsel. Allen & Company LLC and BofA Merrill Lynch acted as financial advisors to Angie's List, and Sidley Austin LLP served as legal counsel.