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Ask.com Parent IAC Battling Majority Stakeholder Liberty Media for Control Liberty Media and its billionaire chairman John Malone filed its second legal action against  IAC Monday, looking to remove media mogul Barry Diller and six other directors from IAC's board, setting off increased antagonism in a dispute over control of the $7 billion e-commerce conglomerate. Internet and entertainment retailing firm Liberty has also asked the Delaware Chancery Court to approve proposed steps significantly reducing Diller's power over IAC. The court's decision is expected to have a direct impact on control of New York-based IAC. Proxy Agreement A proxy agreement dating back over ten years between IAC and Liberty gives Diller, 65, the ability to exercise Liberty's voting stake in IAC, and is considered to be nearby unbreakable due to its being voided only in the event that Diller leaves the firm or dies. IAC operates within a duel-tier voting framework that sees Liberty owning so-called supervoting shares. Liberty also holds some 23 percent of common stock in IAC. Third Court Filing in Less Than a Week Last week both IAC and Liberty sued each other over Diller's planned restructuring of IAC, splitting the company into four new separate public entities in a way that would essentially halve Liberty's control of each new firm. Both Firms Have Large Holdings IAC is a $7 billion e-commerce company, which in 2005 purchased Ask Jeeves Inc., now simply Ask.com, for $1.96 billion. Liberty Media owns the Starz and QVC television channels. Diller and Malone History For the past 20 years Diller and Malone, his 66-year-old longtime financial supporter, have been some of the most recognizable players in the media marketplace, and the partnership they have had over the past 10 years had been seen as working well until a few years ago when IAC saw its stock prices tumble and weakened company performance. In 1995 Diller invested in Malone's company, Silver King Communications, controlled by what was at the time the nation's biggest cable company, Tele-Communications Inc. Silver King is now named in the legal cases filed over the past week. First IAC Filing The first suit, filled last week by Diller, seeks to get the court's approval of Diller's proposed four-company spin-offs and the terms surrounding them before going forward with  the IAC breakup. SearchEngineWorld detailed Diller's plans in November 2007. Diller announced a restructuring plan at a board meeting earlier this month that would see him using his Liberty proxy to vote the corresponding IAC shares in support of a breakup plan ending up with four companies each with single-tier voting systems. Both Diller and Malone, in an increasingly difficult financial relationship brought about by downturns in IAC's performance, have sought out methods that could bring about an end to their ties, the situation escalating in November with Diller's plan to split up IAC. What was first seen as a potential solution that could allow the four new companies to be controlled by Liberty took on a different tone when Diller sought terms that would limit Liberty control to a 30 percent voting stake by changing each to single-tier voting structures, a proposal Diller claims would provide the most value to shareholders. IAC contends that its board unanimously voted to approve Diller's breakup plan in November. Second Filing by Liberty Just days after Diller's initial court filing asking for approval of IAC's proposed breakup, Liberty filed a countersuit seeking to halt the proposed split and to rule the change to a single-tier voting system sought by Diller void. Liberty argued that Diller can not vote Liberty's shares in favor his breakup proposal and that by showing a desire to do so was essentially a breach of their agreement. Third Filing by Liberty Liberty filed legal action Monday seeking to wrest control of IAC from Diller, and nominated replacement directors for the six it seeks to have the courts remove. It also attempts to  overcome Diller's proxy voting agreement with Liberty by virtue of a move by Malone's company that removed Diller as the director of a group of companies known as BDTV which are key to Liberty's stake in IAC, and replacing him with Liberty chief executive Greg Maffei. Should the courts side with Liberty it would take back the voting stake in IAC from Diller. By filing its second legal claim against IAC, Liberty seeks to speed up a solution to the disputes over IAC's leadership and the breakup Diller has proposed, and to pursue a second method of removing Diller from power, arguing that he would be able to sell his shares in the spun-off companies while still retaining control of IAC. The suit makes mention numerous times to Diller's "misconduct," and claims that he has "breached the stockholders agreement" that controls the operation of his proxy agreement. Liberty's claim also seeks to portray Diller as the beneficiary of a salary in his position as IAC's chairman that it calls "record-breaking," a charge Diller has previously sought to dismiss as having been misreported by the press. Along with Diller, Liberty's suit seeks to remove his wife, designer Dianne Von Furstenberg, venture capitalist Steven Rattner, Alan Spoon, Victor Kaufman, Warner Music chief executive Edgar Bronfman Jr., and Arthur Martinez from the IAC board. Liberty has proposed additions to the bylaws under which IAC operates that would prohibit spin-offs without approval from all board members, and that if the spin-offs sought by Diller were to be approved, they should maintain their dual-class voting system. IAC's Harsh Response In a strongly worded Tuesday statement IAC responded to Liberty's bid to take control of the company, contesting the right of the company Malone controls to oust Diller and the other board members. IAC said that Diller did not ask the board to put his recommendations in place and had made it clear that board members would have time to consider the proposal. "We have never asked the board to take action on any specific proposal high, low or no-vote. What we have done, which we thought was the responsible thing to do given this conflict, is to go to the Delaware court and ask them to tell us what rights IAC has or doesn't have," Diller said. "I am beginning to think these people are insane," Diller said in the statement. "Everything they cite is hogwash," he added. IAC called the legal actions filed by Liberty "preposterous" and said they were aimed to pressure IAC's board, in a move it called "a desperate sideshow designed to exert pressure on the board and management of IAC as they attempt to responsibly act in the best interest of their stockholders." A spokesman for Liberty, John Orr, said his company's responses to IAC's suit "speak for themselves," he said in a recent Wall Street Journal article. IAC's statement used harsher words. "Liberty has now gone off the deep end, not only alleging that Mr. Diller has somehow materially breached his proxy by which he has voted Liberty's IAC shares for over 12 years, but also purporting to unilaterally throw out the incumbent directors and installing its own slate," IAC said in the statement, which also put forth "Liberty does not control IAC." Ask.com Parent IAC Battling Majority Stakeholder Liberty Media for Control The increasingly caustic legal battle between the firms for control of IAC may be a lengthy one, despite the pleadings of IAC General Counsel Greg Blatt. "Upon reading this latest complaint, it seems Liberty has gotten truly desperate," Blatt said in a statement Monday. Related Links:
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11:19 pm on Jan. 29, 2008 (utc 0)