Match Group (MTCH) Signs Agreement to Separate From IAC

Match Group MTCH announced that has entered into a definite agreement to completely separate from its parent company — InterActiveCorp IAC. Following this development, IAC will spin-off 81% stake in Match Group. The companies will become independently thriving public players

Investors are elated by this development, as Match Group’s stocks gained nearly 8.5% during the trading session on Dec 19, 2019. Shares of the company have surged 98.5% in the past year compared with the industry’s rise of 17.8%.

Match Group, which marks the seventh spin-off from IAC, has emerged as of the foremost providers of dating products. The company and operates a portfolio of more than 45 brands. Its biggest and best-known brands are Tinder, Match.com, PlentyOfFish, Meetic and OkCupid.

The transaction is expected to be tax free and is likely to close in the second quarter of 2020, upon satisfactory agreement of customary closing conditions.

The deal will give shareholders of IAC direct ownership of Match Group. Greater details regarding the agreement will be provided by the filings by IAC and Match Group.

Notably, IAC operates companies like Vimeo and Dotdash as well as holds substantial stake in ANGI Homeservices ANGI.

Match Group’s Independent Status Likely to be Boon

IAC has been separating from those businesses, which have grown significantly in scale and maturity. In the past 20 years, Match Group has grown from being an innovator in a nascent space to one of the leaders of dating applications, while catering to millions of users across the globe.

As an independent company, Match Group is expected to gain from increased flexibility and trading liquidity. This renewed status along with strong market position is likely to enable the company explore growth prospects.  

Growth in Dating Services Market Bodes Well

According to a survey report released by Technavio, the worldwide online dating services market is anticipated to grow at a CAGR of more than 5% over a period of five years (2017-2021). Per Allied Market Research data, online dating services market is projected to hit $9.2 billion by 2025 from $6.4 billion valuation in 2017 at a CAGR of 4.7% between 2018 and 2025.

Match Group, carrying a Zacks Rank #3 (Hold), is already a trusted dating site with more than two decades of presence in the industry. Consequently, the statistics bodes well for the company and will help Match Group generate additional revenues. You can see the complete list of today’s Zacks #1 Rank stocks here.

Match Group has been benefiting from increasing subscriptions as users from diverse demographics join the fray. New features and tools have also contributed toward enhancing member engagement. The company’s Average Revenue per Subscriber (“ARPU”) improved 9% in third-quarter 2019, driven primarily by strength in North America (up 10% year over year) and international (up 3% year over year).

Tinder’s third-quarter average subscribers increased 1.6 million year over year and came in at 5.7 million.  Renewal rates for Gold were better than expected. Most of Match Group’s users connect from mobile devices, where conversion to paid members is also higher.

With a combination of free features — which includes advertising — and paid subscription-based premium services and options, Match Group’s top line is expected to keep growing in the forthcoming quarters.

However, Match Group faces stiff competition from other big and small players in the dating industry. In this context, Facebook FB poses a potential threat. If Facebook Dating (launched in the United States on Sep 5, 2019) gains traction, Match Group might witness widespread defections in its business.

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