Picking up from Liberty Media-IAC: Diller On The Stand Back at the Liberty Media-IAC (NSDQ: IACI) trial after recess and the questions are fast and furious about Barry Diller’s reactions to negative comments by Liberty Media (NSDQ: LINTA) CEO Greg Maffei and Chairman John Malone, focusing especially, in part, on how much Diller might like to be rid of Maffei’s criticism. Asked if a benefit of getting rid of Liberty’s role in IAC would be an end to Maffei’s comments, Diller said: “No, I probably think he might continue to do so.” Diller also admitted to being hurt by Malone’s comments in the October WSJ story.
– Swap discussions: (Joseph picking up) The cross examination is currently covering the various swap discussions held by Liberty and IAC prior to the spin announcement. A key takeaway: there were many discussions and many different options were explored: asset swaps, go-private ideas, changes in the voting structure, etc. More after the jump.
– The article (again): Diller: “This was hurtful… you couldn’t have produced a worse environment… what I expected was for John Malone to call me and apologize.” Diller professes to have been really shocked that Malone would be involved in that article, and was certain Malone would regret it. “I thought the best thing for us to do was just deal with the issues of the company.” Diller didn’t believe that Malone had any leverage over him and so he didn’t feel compelled to ask anyone for anything, with respect to the spins. Question: “Was your decision to pursue the single tier spin proposal a reaction to the article?” Diller: “No.” Talks on this had been going on for awhile. After the WSJ article: “I thought — you know what — they’re trying to manipulate me.” So basically the article confirmed to Diller that he had no desire to negotiate with Liberty on the spin.
– Control of the spincos (again) : All Diller says is that he wants the four “fresh new little babys” to have the time to become sturdy companies. After a little while, once they’ve gotten running, the companies will have to deal with all kinds of things. “I’ve had calls from people who said ‘I’d be very interested in buying these companies’.” At the moment, though, Diller says IAC can’t negotiate with these parties.
– Personal relationships (again) : Diller is hopeful about his own personal relationship with Malone. When asked to characterize Liberty CEO Greg Maffei as “tenacious”, Diller had no comment: “I’m not going to describe Mr. Maffei.”
– Allen & Co.: On the matter of IAC’s relationship with boutique investment bank Allen & Co., Diller described it as positive and forthright. And he acknowledged that at times, Allen & Co. is paid some kind of ‘extra benefit’ to compensate the firm for work done that never turned into a deal and thus went unpaid. This line of questioned turned to whether Allen & Co. was retained during early spin discussions last spring, which Diller could not recall, though he eventually acknowledged that maybe they had been. The lawyer then wanted to know about the proprietary of hiring the company’s long-term banker to work, then, on this specific issue. Eventually, the judged stepped in here and snapped the lawyer for asking “value judgment” questions. The lawyer countered that he was just testing Diller’s memory, because, alas, Allen & Co. was not retained last spring. The judge was not amused.
– Post-spin voting structure: When the decision to spin was first made, says Diller, there was no talk about voting structures, or how voting structure would affect the operating performance of the spun off companies. Only later (sometime before a December 21 conversation between Diller and Malone) did the company decide to pursue the critical single-tier voting structure. That being said, Diller could not recollect any serious discussion of pursuing a dual-tier structure after the original November 2 announcement.
– ex-GE CEO Jack Welch: IAC has frequent meetings with Jack Welch… “We pay him a million dollars a year for his services.” The lawyer wondered why Diller spoke to Welch on the single-tier voting structure prior to talking about it with Malone. Diller didn’t necessarily admit to that timeline, but said there’d be nothing odd about it, because they talk on all kinds of things.
– Diller-Malone call: Following the WSJ article, the December 21 call between Diller and Malone, referenced above, was a key date. Diller describes the call — the first time Diller told Malone about the single-tier structure — as cool. Malone said then that he was prepared for a proxy battle to ensure he wouldn’t lose control of IAC. Diller’s message to Malone “You lost me.” Between that and the article, a productive relationship had basically ceased. Diller: “If you want a proxy contest, have one.”
And that’s it. The judge has a prior appointment at 5:30 ET and they’ve adjourned for the day. Court will be back in session tomorrow, 9:30 AM ET.