intended to be tax-free to both companies. Liberty has exchanged approximately 12.8 million shares of IAC stock for all of the capital stock of a wholly-owned subsidiary of IAC that holds the Evite and Gifts.com businesses, and approximately $220 million in cash.

Barry Diller is also stepping down as IAC’s CEO, and will be replaced by Greg Blatt, formerly chief executive of IAC portfolio company Match.com.

Right before Liberty’s exchange of shares with IAC, Barry Diller, who will now serve as the company’s Chairman and Senior Executive, exchanged about 4.3 million shares of IAC common stock held by him for an equal number of shares of Class B common stock held by Liberty.

This exchange took place pursuant to the terms of a pre-existing stockholders agreement between Diller and Liberty.

According to a statement, Diller says he “is not going anywhere”.

True enough, Diller still currently owns shares representing approximately 34% of the total votes of all classes of IAC stock, the largest individual voting stake in the company. He was also granted the right to exchange up to 1.5 million additional shares of common stock he may acquire within the next 9 months for an equal number of shares of Class B stock held in the treasury of IAC.

If he buys those shares, his shares will represent approximately 41% of the total votes of all classes of stock.

Evite and Gifts.com will become part of Liberty Interactive’s eCommerce companies portfolio.

The news comes week after IAC laid off most of its Ask.com staff and effectively surrendered its search operations to its competitors.

Diller’s statement on the exchange, in full (John Malone is Chairman of Liberty Media):

“These last 17 years of my association with John Malone and Liberty Media have been a great, and occasionally, wild ride. We began this grand tour of interactivity a few years before the internet became widely used, and we were able to create, acquire and build up substantial businesses over that time.

While I’ll continue my association with Dr. Malone in Expedia, and as significant shareholders of the multiple spun-off companies, Liberty’s exit from IAC is a turning point, and I want to state my thanks and gratitude to Dr. Malone for his support and encouragement throughout (with one brief period of mutual discontent which we both believe was an aberration).

This has been a most productive partnership and I’m glad it will continue in other venues.”

IAC in its third-quarter earning release reported that total revenues for Q3 2010 were $422 million, up 25 percent compared to the same period last year.

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Authors: Robin Wauters

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