University of Indianapolis Associate Professor of Finance Matt Will says one of the surprising aspects of the planned acquisition of Indianapolis-based Angie’s List Inc. (Nasdaq: ANGI) by New York-based IAC (Nasdaq: IAC) is that it took so long to happen. The parent of Angie’s List competitor HomeAdvisor previously made multiple offers to buy the company, which were ultimately rejected. Will says taking the deal now is "the right thing to do."
In an interview with Inside INdiana Business, Will says Angie’s List is a company that was designed to be taken over.
"It’s never been profitable. There was never a forecast of profitability, you know, a quarter here and there," said Will. "Basically, it was all about acquiring members and monetizing those members and we knew that Angie’s List wasn’t the entity to monetize that. It had to be someone else. When they passed on the deal in 2015, it was just a matter of time. I thought they should’ve taken the deal then and I’m glad they’re taking the deal now."
Will says IAC’s offer to shareholders of $8.50 for each share of Angie’s List stock they own may be a little low. Angie’s List stock skyrocketed after the announcement of the acquisition to above $9.50 per share at the end of trading Tuesday. Will says there are some entities that are investigating whether the offer should be higher.
"The market is kind of siding with them which is why the price is above $9 a share. That is probably going to throw a little bit of a complication into this," said Will. "It wouldn’t surprise me if they come back with an enhanced offer because when shareholders get involved and shareholders have more rights nowadays, they make changes."
Will says IAC’s expectation of the acquisition closing by the end of this year is very possible. He adds the big question will be what will happen to the Angie’s List employees because he expects there will be some job losses. IAC says the combined company, which will be known as ANGI Homeservices Inc., will be based out of HomeAdvisor’s headquarters in Golden, Colorado.
Despite that, he says the merger is good for Angie’s List.
"For the company as a whole, it’s a great thing because this company cannot sustain itself losing money and there was no prospect of them every becoming profitable," said Will. "The whole game of e-commerce from a decade ago was ‘How are you going to monetize it?’ and there are some companies that have begun to do that. This is a good thing for Angie’s List to exist and survive in the long term."