Media mogul Barry Diller's IAC on Friday announced that it agreed to buy Care.com in a deal valued at nearly $500 million, one day after detailing plans to spin off all of its shares of online dating company Match Group.
IAC, a holding company for dozens of digital brands, will pay $15 per Care.com share in an all-cash transaction— a 13.2% premium over where Care.com stock closed on Thursday at $13.25 per share.
Shares of Care.com were, indeed, gaining more than 13% on the news at the open.
However, Care.com shares cratered earlier this year from March all-time highs of nearly $26 each, after a Wall Street Journal investigation questioned the online marketplace's vetting process for its caregivers. The company's founder, Shelia Lirio Marcelo, resigned as CEO in August, five months after the Journal story. Following Marcelo's decision to step down, hedge fund Engine Capital, an activist investor, urged Care.com to pursue a sale.
In a CNBC interview on Friday, IAC Chief Executive Officer Joey Levin said that Care.com has made a lot of progress on safety since March.
However, he stressed, "Safety is going to be a top priority for us. It is on all of our platforms."
"[You] got to do things like background checks, and you got to give tools to both sides of the market place to make sure people are safe," he added.
As part of the IAC deal, Tim Allen, an IAC executive, will become CEO of Care.com.
"Since our founding 13 years ago, we've delivered on our mission to help millions of people find affordable, high-quality care and caregivers find meaningful work," Marcelo said in the statement announcing the agreement.
Care.com said it has had more than 1.5 million successful matches since it started in 2006, with 374,000 paying families as of the third quarter of 2019.
"We think its a huge marketplace — about a $300 billion market just in the U.S.," Levin said.
Besides safety, IAC's other plans for Care.com include product innovation, monetization and marketing, and new growth areas including senior care, according to the release. The company said that it does not expect to "deliver positive operating profit during the first year of ownership" because of the investments it will be making in Care.com combined with "a number of transaction adjustments."
Another big focus will be "starting to go more towards an on-demand" and "transactional" platform, Levin said. This means not just showing users a list of "care providers who may be available to do their job, but actually helping match them and bring them together and make that transactional on the platform." IAC is also taking similar steps at Angie's List, another one of its marketplaces.
The Care.com deal is expected to close in the first quarter of 2020, according to the release.