IAC/InterActiveCorp, Barry Diller's internet conglomerate, yesterday agreed to buy Ask Jeeves, the search website, in an all-shares deal worth $1.85 billion (€1.4 billion), as it seeks to capture a larger share of online advertising and search markets.
Ask Jeeves leavens IAC's heavy portfolio of travel and e-commerce sites, including brands such as travel website Expedia and home shopping network HSN.
Ask Jeeves, which, reports 42 million unique users a month, will have its search box featured on IAC sites, which attract 44 million unique monthly users.
Mr Diller told analysts that Ask Jeeves was a "distant fifth" in search - behind Google, Yahoo, Microsoft and America Online - but had the greatest opportunity to gain market share boosted by IAC's investment and marketing know-how.
Shares in Ask Jeeves jumped more than 13 per cent to $27.46 in morning trade. Shares in IAC dipped more than 4 per cent to $21.28.
The offer represented a multiple of only 18-times forecast earnings for 2005 compared with similar recent deals in the sector of 20- to 30-times earnings.
"It's a home run for Inter- Active," according to Clayton Moran, analyst with Stanford Group equity research.
However, IAC's bid represented a significant discount for an undervalued stock.
"It opens the door up to potential suitors. I wouldn't be surprised to see someone else come in and bid a higher price," Mr Moran said.
He added that large media companies such as Rupert Murdoch's News Corporation might be interested in Ask Jeeves to help drive online advertising.
The New York Times bought About.com for $410 million last month and, in 2004, MarketWatch.com, a financial information website, was purchased by Dow Jones.
Search comprises 36 per cent of US online advertising and is expected to grow 24 per cent a year over the next five years, according to Merrill Lynch.
Mr Diller said that he believed Ask Jeeves had "the potential to become one of the great brands on the internet and beyond - and, by beyond, we mean in wireless, in the search for anything on any device".
IAC will issue 12,668 shares of common stock for each share of Ask Jeeves common stock in a tax-free deal valued at $1.85 billion net of cash acquired.
It intends to buy back at least 60 per cent of the shares it will issue for the acquisition to offset dilution from the transaction with cash.
Ask Jeeves will remain an independent brand, with Steve Berkowitz continuing as chief executive. - (Financial Times Service)
