Fight between Liberty, IAC could get messy

NEW YORK -- At issue is whether Malone gave away the store in the mid-1990s when he agreed to let Diller control Liberty's stake in IAC — which equals 63.4% of its voting shares.

Last week the companies sued each other over a plan that Diller unveiled in November to break IAC up into five companies, cutting Malone's voting power in half.

The proposal would keep ad-supported websites including Ask.com at IAC while creating separate publicly traded entities for HSN (formerly Home Shopping Network), Ticketmaster, Interval International and real estate sites including LendingTree and RealEstate.com.

On Monday, Malone asked the court to replace Diller and six other board members.

"Liberty has now gone off the deep end," IAC said in a statement on Tuesday.

It adds that the court filings demonstrate "that Liberty will stop at nothing to advance their own interests at the expense of the other stockholders."

Liberty has accused the board of violating its fiduciary responsibility to shareholders. It declined to respond to IAC's statements.

Few expect the famously hardheaded protagonists to settle soon. "It's going to get worse before it gets better," says Natixis Bleichroeder analyst Jeffrey Shelton. "Here's a very public divorce proceeding, and each side is trying to gain leverage."

That's a startling ending to a marriage that once seemed to have a solid personal, as well as professional, foundation.

Malone in 1995 was glad to tap an executive of Diller's stature to take charge of Liberty's HSN and a fleet of TV stations.

Diller knew the home shopping business: He had just left QVC, after a failed effort to buy CBS. He also was still highly regarded for his work creating the Fox Broadcasting network and, before that, running Paramount and ABC's programming.