Indianapolis-based Angie’s List (Nasdaq: ANGI) says its board of directors has unanimously voted not to pursue an acquisition offer from the New York-based parent company of HomeAdvisor. In a statement, the company says InterActiveCorp’s (Nasdaq: IACI) offer "dramatically undervalues the company and its long-term standalone prospects."
The company says it is "premature" to conclude that such a transaction is in its shareholders’ best interests. Chief Executive Officer Scott Durchslag says the board and management team "are united in our belief in Angie’s List and our market-leading platform." He says the company’s Profitable Growth Plan is underway, and says feedback from members and service providers gives company leaders "confidence that we are heading in the right direction."
IAC’s offer is valued at about $512 million in cash. HomeAdvisor is a Colorado-based competitor of Angie’s List. Parent company IAC also owns digital properties including Tinder, Ask.com, Dictionary.com, the Daily Beast, College Humor and Match.com.
Durschlag sent the following letter to IAC CEO Joey Levin:
The Angie’s List Board of Directors, with the assistance of its independent financial and legal advisors, has considered your November 11, 2015 letter proposing to acquire Angie’s List for $8.75 per share in cash. Based upon a thorough analysis, the Board has unanimously reaffirmed the conclusion it reached and I communicated to you regarding IAC’s October 23, 2015 proposal to acquire Angie’s List for $8.50 per share. This followed your initial October 5 letter, when you first approached me regarding a potential combination.
We continue to believe that there is significant value embedded in the Company and that it is premature to conclude at this time that a strategic transaction is in the best interests of Angie’s List shareholders. We appreciate your interest in Angie’s List and your recognition of our market-leading platform.
As you are aware, I was appointed as the new President and Chief Executive Officer of Angie’s List in September. As announced on the third quarter earnings call, we are developing a new Profitable Growth Plan for the Company. While we expect to provide the details of this plan next quarter at our Investor Day, we are already beginning to execute some elements of it.
In addition to our new Angie’s Fair Price Guarantee and Angie’s Service Quality Guarantee announced last month, we launched LeadFeed last week, a new product designed to capture demand from free online visitors and turn that demand into leads for service providers. We have identified $10 million in cost reductions, redesigned the sales force, baselined Net Promoter Scores, changed media agencies, shifted ad spend toward digital channels, and began scaling our new Angie’s List 4.0 platform nationally.
In connection with our third quarter results, we reported improved efficiencies, including in selling and marketing expenses, together with increased quarter over quarter revenues, that led to expanding margins in the third quarter. The increased revenue reflects improved year on year service provider metrics, including increases in contract value, backlog, total members, first year member retention, web traffic, mobile web traffic and consumer and service provider participation in e-commerce. Additionally, we turned around the second quarter’s sequential decline in participating service providers. The 2015 third quarter was the first profitable third quarter in the Company’s history.
The positive results we are seeing give us confidence in the direction we are heading. The market also appears to share our enthusiasm as the Company’s stock price increased 11% on the day we announced our third quarter results and previewed elements of this Profitable Growth Plan, and has increased 27% from that day through market close on November 11, prior to when IAC publicly announced its proposal1.
As I explained to you on our telephone call on November 3, the Board considered your October 23 proposal and concluded that it should have the opportunity to fully evaluate our Profitable Growth Plan and should share that plan with shareholders before reaching a decision as to whether to engage in a transaction with IAC or any other party. Nevertheless, IAC publicly announced its unsolicited $8.75 per share cash proposal only eight days later. Notably, this “increased” proposal represented only a 10% premium at the time it was made and dramatically undervalues the Company. We therefore believe it is not a compelling reason to shift our focus to IAC and derail the turnaround work we have underway, particularly given the long-term value creation potential of our plan. While such shift may be good for IAC shareholders, we do not believe it is in the best interest of Angie’s List shareholders.
The Board of Directors and management of Angie’s List are committed to enhancing shareholder value, and our interests are aligned with all Angie’s List shareholders’ as together we own more than 20% of the Company’s outstanding shares. The Board does not believe it is in the best interest of Angie’s List shareholders to rush to judgment and that doing so would be contrary to our fiduciary duties. If the strategic logic underpinning your proposal is sound, it will still be sound next quarter when our Profitable Growth Plan is announced. Once our Profitable Growth Plan is completed and our shareholders informed, we will of course consider any value enhancing alternative to the plan, including a transaction with IAC or other third parties.
On behalf of the Angie’s List Board of Directors,