When Cash Isn’t King

The WSJ’s Jessica

Vascellaro has an interesting article about what Jeff Bercovici calls

the "Diller-Malone marriage": two media moguls fighting over control

of a bunch of internet properties which presently goes by the unwieldy name

of IAC/InterActiveCorp. IAC bought also-ran search engine ask.com in 2005, for

stock, a decision Malone is unhappy about:

"If it had been me, I would have been willing to pay a higher price"

to do a cash transaction, Mr. Malone says. "Barry doesn’t use his balance

sheet effectively. He is not a financial guy."

Now I understand that Malone would like more leverage in IAC, and if he can’t

persuade Diller to get there through financial engineering, he’d be just as

happy to see IAC’s cash pile run down through acquisitions. But it seems to

me a bit of a stretch to go from there to saying that he would actually be willing

to pay more for ask.com if he was paying in cash than if he was paying

in stock.

Generally, in any M&A deal, an all-cash transaction is the gold standard,

the benchmark against which all other deals are measured. Typically you need

to pay more, if you’re paying in scrip. If Malone is going to go on the record

about Barry Diller being "not a financial guy," then he might want

to use a better example than Diller’s refusal to pay a premium for the privilege

of paying in cash.

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