WILMINGTON, Del. — Though Liberty Media holds the controlling interest in an Internet conglomerate that includes Ticketmaster, Citysearch and LendingTree, Liberty’s chairman testified Monday that billionaire Barry Diller thinks he calls the shots.
“He frequently refers to it as his business,” said John Malone, who is challenging Diller’s plan to break IAC/Interactive Corp. into five publicly traded companies — and eliminate Liberty’s control.
In November, Diller, the chairman who built the conglomerate mostly through acquisitions, announced plans to spin off IAC’s HSN home-shopping network, Ticket master ticketing service, Interval time-share business and LendingTree mortgage-referral units.
Although Douglas County-based Liberty Media Corp. owns about 30 percent of IAC’s equity, it controls about 62 percent of the voting power because of a dual-share structure. Diller has controlled Liberty’s votes for years under a proxy agreement with Liberty.
At question in a lawsuit filed this year is whether Diller gave up those rights when he went against Liberty’s will in pushing forward a plan to carve up IAC.
Under Diller’s plan, which has been approved by IAC directors, each spun-off company would have a single-tier voting structure. Liberty’s voting power thus would shrink to about 30 percent.
“I think it’s very unfair,” said Malone, the lead witness in a Chancery Court trial that could determine IAC’s fate.
Malone testified that after he questioned whether the spinoff plan should be put to a shareholder vote, Diller said he would use Liberty’s proxy power to force the deal.
“My opinion is that it’s a breach of the stewardship that we granted him when we started this whole relationship,” Malone said under questioning.
William Berkman, a Liberty appointee to the IAC board, confirmed Malone’s recollection of Diller’s response when Malone said the spinoff plan should be put to a shareholder vote because it involved issues regarding the board’s fiduciary duties.
“He pushed it, and Mr. Diller responded in a crystal clear fashion: ‘We’ll have a vote, I’ll vote the shares, . . . and we’ll have the spinoff.’ The room was quiet,” Berkman said.
Berkman said he was surprised when he learned in early January about the proposed one-class voting structure for the spinoffs.
“First and foremost, there had been a lot of trust between these two gentlemen for a long time,” he said, adding that the plan also raised questions of “fundamental fairness” and was in contrast to the two-tier structure in IAC’s previous spinoff of Expedia.
