Angie's List (ANGI) Stock Rallies 60% On IAC Buyout Bid

On Tuesday, shares of consumer-recommendation website Angie’s List (NASDAQ:ANGI) are rallying big-time, up about 60% in morning trading after the company agreed to be acquired by online conglomerate IAC/Interactive Corp. (NASDAQ:IAC) .

Under the terms of the deal, Angie’s List shareholders can choose to receive $8.50 in cash per share or a share in the newly combined company, which is set to be called ANGI Homeservices Inc. At $8.50 per share, the deal values Angie’s List at over $500 million, representing a 44% premium over the stock’s closing price of $5.89 on Monday.

ANGI Homeservices will combine Angie’s List and its direct rival, HomeAdvisor, which IAC also owns; both websites allow people to search for professionals that provide services like home repair. The new company will be publicly traded, and IAC will own about 90% of the stock in the combined company.

"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,” said Thomas R. Evans, Chairman of Angie’s List.

IAC, and specifically its most famous chairman, Barry Diller, tried to buy Angie’s List before, making many buyout offers back in 2015. Angie’s List rejected the $512 million bid, calling it “dramatically” too low; it represented a 10% premium at the time, when Angie's List market cap topped $575 million.

Since then, the value of ANGI stock has plunged. Its market cap currently sits at about $350 million, and the company lost nearly $8 million in 2016. Over the past one year, ANGI has lost over 32% in value.

For IAC, the Angie’s List acquisition is an opportunity to create the next big online, on-demand marketplace. The company notably buys businesses, combines similar sites into the same holding company, and then spins them off. This model created Expedia (NASDAQ:EXPE) , which now owns numerous other travel sites like Hotwire, Trivago, and HomeAway, among others. IAC also did the same for Match Group (NASDAQ:MTCH) , which owns Tinder, OkCupid, PlentyOfFish, Match, and other dating sites.

The deal is expected to close by the end of this year. HomeAdvisor’s current CEO Chris Terrill will head the new company, and Angie’s List CEO will remain at least until the deal closes. JPMorgan Chase (NYSE:JPM) acted as financial advisor to IAC and HomeAdvisor, and Wachtell Lipton Rosen & Katz LLP provided legal counsel. Allen & Company and BofA Merrill Lynch advised Angie’s List, while Sidley Austin LLP served as legal counsel.

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