Diller: Maffei Smeared Me3/14/2008 8:00 PM Eastern
Barry Diller got his day in court last Thursday, defending his stewardship of the Internet conglomerate IAC/InterActiveCorp and accusing Liberty Media CEO Greg Maffei of launching a smear campaign against him and the company.
Diller was the last witness to take the stand in the five-day trial in Delaware Chancery Court in Wilmington.
Diller wrapped up his testimony on Friday, March 14, after which Chancery Court Judge Stephen Lamb will have two to three weeks to render a decision — although settlement talks are reported to be under way.
SPLIT AT ISSUE
The dispute stems from a proposal by IAC in November to split the company into five parts — IAC, Interval International, HSN, Ticketmaster and Lending Tree. IAC had said the split would simplify the company, but Liberty contends that the proposed single-class structure of the new entities would halve its voting control of IAC from 62% to 30%. Liberty owns a 29% economic stake in the company.
In the previous days of testimony, IAC chairman Diller was characterized by Liberty chairman John Malone and Maffei, his second in command, as a poor manager who steered IAC's market cap from $22 billion in 2003 to about $6 billion today.
While Diller admitted in court the company's worth has plummeted the past five years, he pointed to strong growth at units such as search engine Ask.com and online ticketing giant Ticketmaster.
“We've had these spikes over the years,” Diller said, according to a court transcript. “Around 2000, we looked like the Swiss Alps,” he added, describing the company's stock charts.
Malone had complained in testimony last Monday that Diller acted like the company was his.
In an October article in The Wall Street Journal — which enraged Diller, according to court testimony — Malone hinted the stage could be set for Diller's exit.
“The hook is set. It is our company,” Malone said in the article. “Barry ain't going to be able to spit the hook.”
In court last week, Diller got his chance to publicly reply. “I sail. I don't fish. I got the point,” Diller said, according to transcripts.
Diller said Maffei had engineered a campaign to smear him and IAC. He called Maffei “an irresponsible executive.”
“I would not think it would be in the interest of the IAC companies, the IAC shareholders for him to have an operating or other kind of control at IAC,” Diller said of Maffei, according a trial transcript.
Diller and Maffei have a contentious history. IAC launched a takeover bid of Expedia in early 2002, and was initially rebuffed by Maffei, who at the time was Expedia's chairman.
Diller and IAC increased their bid for Expedia and, in March 2003, won control of it for $3.7 billion in stock and $2.1 billion in warrants and options.
IAC later spun off Expedia as a separately traded company in 2005, with Diller retaining voting control.
Maffei, who was also CFO of major Expedia investor Microsoft at the time, left Expedia's board in 2005 over a dispute concerning $28 million in stock options Maffei believed was owed him but which Expedia and IAC claimed had expired.
Maffei had said in earlier testimony last Wednesday that he initially sought to recuse himself from negotiations regarding IAC because there was a possibility he might take legal action in the future against IAC and Diller over the stock-option dispute.
Diller also disputed claims by Malone and Maffei that the IAC chairman had proposed the split mainly for personal gain.
Diller said that while he would like to take personal control of IAC, he would never do so at the expense of shareholders. He also said over the past two years he has “many, many times” rejected offers to swap assets with Liberty.
“It wasn't for lack of desire,” Diller said. “They never got to the value that we could take to our board.”
Lamb has two to three weeks to make a decision on the case, but a resolution could come quicker than that.
Earlier last Thursday, Pamela Seymon, a partner at Wachtell, Lipton, Rosen & Katz (IAC's outside counsel), said the parties were having settlement negotiations. She said the talks centered on proposals to swap assets between the two parties, Bloomberg News reported.