In a recent letter, TCS Capital is once again calling for a buyout of Angie’s List (NASDAQ: ANGI). The activist investor owns 9%. Recall it went active back in July, saying there are multiple options to boost value at Angie’s List.
The letter details the fact that Angie’s List Chairman John Chuang motives aren’t aligned with the majority of shareholders. He owns 20% of the outstanding shares, but share are down 50% since he became chairman.
TCS notes Angie’s List strong brand and significant customer/revenue base. But the competition is just too much in the home services industry, where it no longer makes sense for Angie’s List to remain a standalone company.
The best bet for Angie’s List? A strategic combination with another industry player such as HomeAdvisor, an operating business of IAC.
An Angie’s List-HomeAdvisor combination would provide much needed scale to compete successfully in the $300 billion home services market. And it would yield significant cost savings and end a hostile marketing battle between the two companies. There may also be significant revenue synergies utilizing the combined resources of the two entities. Customers and employees would also benefit from the resources and stability offered by a larger company.
The transaction could be structured in a tax-free manner and Angie’s List could remain public, which would allow current shareholders to participate in the upside of a much stronger entity with re-accelerating growth and profitability.
With that, Angie’s List shares could at least double or triple following a combination with HomeAdvisor. TCS ends by calling for a rigorous exploration of this compelling strategic combination.
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