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Author: schouwla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 188  
Subject: Re: USAI to buy TREE Date: 5/5/2003 6:31 PM
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Yes it is wonderfull 40% up in one day. To be patient pays off.
Here is the news from Reuters.

By Derek Caney

NEW YORK, May 5 (Reuters) - USA Interactive (USAI), the Internet company controlled by media mogul Barry Diller, on Monday said it would buy Web-based loan provider LendingTree Inc. (TREE) for $716 million in stock, thrusting the travel and retail merchant into financial services.

The deal would add LendingTree to its array of retail businesses, which include Ticketmaster and the Home Shopping Network, in an effort to rival eBay Inc. and Amazon Inc. for dominance in transacting business over the Internet.

"USA Interactive has talked for some time about adding another leg -- financial services -- to their business," said U.S. Bancorp Piper Jaffray analyst Safa Rashtchy. "And LendingTree is the most obvious candidate. It's a huge market and you don't need huge market share gains for the business to grow nicely."

By piggybacking onto USA's other online businesses, LendingTree is betting the deal will yield more consumers and more transactions for the 200 banks that use the service to find potential borrowers.

USA Interactive, which is buying the shares it doesn't already own of travel sites Expedia Inc. (EXPE) and Hotels.com (ROOM), plans to issue 21 million shares at a rate of 0.6199 of its shares for each LendingTree common and preferred share.

The deal values LendingTree at $21.67 per share, or a 47.5 percent premium above the company's closing price of $14.69 Friday. At the time the deal was announced, it was valued at $734 million.

USA Interactive's stock closed at $34.10, down 2.5 percent, although shares have risen more than 60 percent in the last three months. LendingTree's shares closed at $20.72, up 41 percent, or $6.03, more than doubling in the last two months.

LendingTree offers a service that matches borrowers with prospective banks, including big names such as Citigroup Inc. (C) Bank One Corp. (ONE) and MBNA Corp. (KRB), for home and auto loans, and receives a service fee from the lender when the loans close. It also matches home buyers with prospective local realtors.

The company swung to a $5.1 million profit last quarter, helped by increased homebuyer use of the Internet with interest rates near 40-year lows.

"This is strategically where Barry Diller has been taking this company. He wants to get closer to consumers on the Internet." said Dan Veru, the executive vice president at Palisade Capital Management, a Fort Lee, New Jersey-based money manager that owns about 700,000 shares of LendingTree.

"LendingTree is a really unique asset," he said. "There's really no company to compare it to, because unlike other online lending companies they don't make loans. It's no different than something like eBay -- creating a level playing field to get a loan at the lowest price"

While analysts expect use of the Internet to obtain loans to rise, some analysts expressed concern that USA Interactive could be picking up the business at the top of the market for mortgage refinancing.

"The risks are that refinancings could slow down in the second half of the year because of potentially higher interest rates," said Richard Repetto, an analyst with Putnam Lovell NBF.

LendingTree's founder and chief executive, Doug Lebda, said in a conference call with analysts he was not worried about the potential decline in refinancings.

"As the refinance volume is very high, our mortgage lenders have not needed us, because their traditional channels have been booming," he said. "But as interest rates rise and refinancings fall off, lenders come onto our exchange and our close rates go up."

Diller, for his part, said he doesn't care what the prospects for refinancing are. "We're buying this for the long- term prospects," he said on the conference call. "We couldn't care less what happens in the very near term. We care about whether we've bought the right business."

He hopes to apply to the financial services field his strategy of moving business online, as he did with travel and retail.

"For us, financial services and real estate are not only huge, but these areas are about as rich as they come for online migration," he said.

USA Interactive, based in New York, said the deal would be neutral to its earnings and is expected to close in late summer.

It also said it has received binding voting agreements to support the deal from LendingTree shareholders representing 31.5 percent of the Charlotte, North Carolina-based company's outstanding shares.

LendingTree's Lebda and its president, Tom Reddin, will remain in their current positions, the companies said. (Additional reporting by Philip Klein, Jonathan Stempel and Tom Johnson) REUTERS

© 2003 Reuters

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