Angie's List remains potential acquisition target
Consumer review company recently rejected a $512 million purchase offer and merger with one of its largest competitors.
Angie’s List rejected a $512 million purchase offer this month that would have merged the consumer review company with one of its largest competitors, but that doesn’t mean the Indianapolis-based firm is no longer an acquisition target.
Financial experts say IAC/InterActiveCorp’s spurned offer to purchase Angie’s List for $8.75 a share could entice other companies interested in buying the business. They also said it's possible IAC could sweeten its deal.
“There are other companies that could be interested in Angie’s List,” said Kerry Rice, a financial analyst at Needham & Co., citing companies such as Amazon, Home Depot and Lowe's. “If the IAC offer is not consummated, there is the potential.”
IAC proposed merging Angie’s List with its consumer review service — Denver-based HomeAdvisor — but Angie’s List board of directors rejected that outright. IAC is controlled by billionaire Barry Diller and also owns dating sites and apps such as Tinder, Match and OkCupid.
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If Angie’s List were purchased, it could lead to a restructuring and possible downsizing of the Indianapolis-based company, financial experts said. Angie’s List employs about 1,900 people in Indianapolis.
The company would not comment on the potential of future offers or a possible counteroffer by IAC. A spokesperson referred The Indianapolis Star to a statement released by Angie’s List President and Chief Executive Officer Scott Durchslag.
“The positive reception we are receiving from members and service providers to our new offerings gives us confidence that we are heading in the right direction,” he said.
Earlier, Angie's List said its board determined that it was "premature to conclude" that an offer like IAC's was in the best interest of shareholders. “Further, the Angie’s List Board of Directors concluded that IAC's $8.75 per share cash proposal dramatically undervalues the company and its long-term standalone prospects,” the company said.
Angie’s List has been having a strong year. It is on course to turn an annual profit — the first since it was founded in 1995. It also closed out the third quarter with revenue of $87 million.
Throughout its history, the company has been dependent on capital infusions from its investors.
Oppenheimer & Co., a New York-based investment firm, upgraded its financial performance projections for Angie’s List in light of the IAC purchase offer, expecting the company to outperform estimates made earlier this year. It viewed the company’s attempts to modernize its services as favorable.
In October, Angie’s List put forward two measures to guarantee its customers fair prices and quality of service. If a service isn’t satisfactory, the company either will make it good or reimburse a customer up to $100,000. It also pledged to pay customers the difference on goods purchased within 30 days if they find a better deal.
The move is designed to help Angie’s List compete with companies such as Amazon and Yelp, which allow people instant access to customer reviews.
Scott Smart, a clinical professor of finance at Indiana University's Kelley School of Business, echoed Rice’s comments, saying the IAC offer placed Angie’s List on the radar and that other companies might take an interest.
“There could be a revised bid from IAC,” Smart said. “When a company gets put in play like that, a lot of fresh eyes are looking at it. It would not be surprising if there was another bid from IAC or other future buyers.”
Smart said it's likely that IAC will submit a revised offer to Angie's List, and although a hostile takeover is possible, it's not likely. If that were to happen, it would depend on the willingness of Angie's List stockholders to sell, he added.
Angie's List also could face pressure from its investors if it turns down lucrative offers in the future, Smart said.
Even if Angie’s List remains intact, the company most likely will undergo some changes to increase its competitive advantage, Rice said. Angie's List has struggled to keep up with competitors such as Amazon and Yelp.
“There is potential to re-accelerate growth and make the platform more innovative,” Rice said. “There are certainly opportunities to transform the company.”
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Call Star reporter Kris Turner at (317) 444-6047. Follow him on Twitter: @krisnturner.