IAC/InterActiveCorp / VUE

Barry Diller's Internet conglomerate IAC/InterActiveCorp said Wednesday it is selling its stake in Vivendi Universal Entertainment for $3.4 billion, ridding the billionaire investor's company of a convoluted relationship as it gears up to enter the lucrative online search engine market.

The deal turns over New York-based IAC's 5.4 percent stake in Paris-based Vivendi to NBC Universal, which runs the television, theme parks and movie divisions owned by Fairfield, Conn.-based General Electric Co.

IAC and Vivendi also agreed to drop lawsuits that they had filed against each other in Delaware.

The truce ends an acrimonious alliance created when Diller -- the former head of Paramount Pictures and the Fox television network -- sold the USA network and other cable properties in 2002.

IAC's shares surged $1.17 to close at $25.81during late trading on the Nasdaq Stock Market while General Electric's shares edged fell 4 cents to close at $36.80 on the New York Stock Exchange.

Shedding Vivendi enables IAC to intensify its focus on a stable of popular Web sites that includes Ticketmaster, LendingTree, Match.com and Evite.com.

The company also owns the online travel agency Expedia, but it's preparing to spin off that site, along with Hotels.com and Hotwire.com, to make it easier for investors to grasp the value of its vastly different holdings.

IAC is hoping to accelerate its growth later this year after it completes its pending $2 billion acquisition of Ask Jeeves Inc., an Oakland-based company that runs the fifth most popular search on the Internet.

Diller wants to transform Ask Jeeves into a more formidable challenger to the two dominant search engines, Google Inc. and Yahoo Inc., and generate more advertising revenue.

IAC's decision to spin off its online travel sites and expand into Internet search is raising investor expectations, said analyst Martin Pyykkonen of Janco Partners. "I don't think people are quite ready to declare Barry Diller a genius again, but people are feeling better about this stock than they have been," he said.

Under the terms of complicated deal announced Wednesday, IAC is getting back about 56.6 million of its own stock that had been held by Vivendi, as well $865 million from the sale of U.S. Treasury bonds that had secured its interests.

Vivendi also is paying an additional $235 million in cash while General Electric is chipping in $800 million, including $100 million of free advertising that IAC will be able to use on NBC or one of its other television networks.

(AP)