Deals

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

For Angie's List, it's time to come to the table.

IAC/InterActiveCorp, the Internet holding company headed by Barry Diller, went public  late Wednesday with the news that it had been rebuffed by the struggling consumer-review website after months of trying to start up deal talks. IAC then offered a new proposal of  $8.75-a-share in cash, or a combination of Angie's List with its rival site HomeAdvisor in a stock-for-stock deal.

Angie's List, founded by Angie Hicks, said it would take a look at the latest offer. It should do more than that, and some shareholders are already betting they will: The stock rose above $8.75 in trading midday Thursday, a sign some investors are betting renewed talks will result in an even higher price.

Takeover Target?

On the face of it, the $512 million proposal is no blockbuster, representing a 10 percent premium to where Angie's List traded on Wednesday. But an acquisition approach isn’t exactly a surprise, either. The Financial Times reported Angie's List was talking with buyers more than a year ago and activist investor TCS Capital had been raising the possibility of a sale since at least August, and of a deal with HomeAdvisor since last month. That speculation had already helped to drive up the stock, as IAC helpfully points out in its release.

Whether it's 10 percent or 50 percent, though, it's generally not a good idea to turn away from an interested buyer when your business is on track for its slowest-ever revenue growth and analysts aren't too hot on your standalone prospects. Even a 10 percent bump looks attractive when one considers that analysts were projecting the shares would decline 20 percent over the next year.

Angie's List's Roller Coaster Ride
IAC's offer is a fair enough price for the consumer-review website
Source: Bloomberg

Also worth noting is the fact that when takeover speculation brewed last year, Northland analysts pegged $8.75-a-share as a reasonable takeover valuation for the company -- and the outlook for its business has gotten worse, not better since then. 

Angie's List has plans to turn itself around by becoming more efficient. That's great, but cost savings will only help so much as competition from Amazon and Pro.com intensifies.

Companies should always try to get the best value for their investors. If Angie's List can get IAC to bump its price, fine. But holding out for much longer has its risks, too.  

Given time, IAC may reconsider. It could be argued that Angie's List isn't the ideal acquisition target anyway. As it prepares to take its Match.com division public, IAC needs to restock itself with growing platforms. Angie's List is somewhat of a fixer-upper and wasn't really what investors were hoping for. 

Should IAC get cold feet, there aren't many acquirers for which Angie's List would be as natural a fit. Amazon has been mentioned, but the company doesn't often do big deals and when it does, it tends to buy companies it sees as a threat, not ones it's rolling over. Home-improvement companies such as Lowe's or Home Depot are a possibility but it would be more of a strategy shift for them.

At some point soon, Angie's List might want to just take the money. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net