HSN retail network chief sets stage for spin-off

By Michele Gershberg Fri May 9, 2:52 PM ET

NEW YORK (Reuters) - Mindy Grossman is very particular about what makes it to air on the HSN cable retail network she helms, down to the blouse worn by a presenter.

That eye for detail is credited with helping the network, part of Internet conglomerate IAC/InterActiveCorp, climb out of a multi-year funk. Now she may well be the executive to take HSN to the public market, under a plan by IAC to spin off four of its businesses, including HSN.

"I think I've been preparing for it for 30 years," Grossman said in an interview with Reuters in New York. "You don't cram and take a test for it. It's something you've been building for, and that's probably what's most exciting."

Since she became chief executive in 2006, Grossman has added smarter fashion to HSN's fare of crock pots and cubic zirconia, and spruced up its shows with celebrity stylists and chefs.

A former executive for high-impact brands like Nike and Ralph Lauren, she faced no easy task at HSN, which stands for Home Shopping Network.

The unit, including its web site and Cornerstone catalog business, accounts for about 42 percent of IAC revenue and has slowly pulled back up to report revenue growth of 2 percent in the first quarter. Excluding Cornerstone, growth was 9 percent.

Add to that plenty of confusion over its future. IAC -- run by media veteran Barry Diller, and its controlling shareholder Liberty Media Corp, built by cable mogul John Malone -- tried repeatedly to negotiate a swap deal for HSN.

The two sides at one point a year ago came close to an agreement to hand HSN over to Liberty, which already owns larger rival QVC, in exchange for Liberty's stake in IAC.

"I can honestly say that I have not lost sleep over any other alternative," Grossman said. "I've been totally focused on where we're going now, which has been to be spinning off. I think that's the right thing for the company."

IAC and Liberty even sued each other over the spin-off plan, which Liberty said would dilute its control over HSN and the other units.

LIBERTY SAYS OPTIONS ARE OPEN

A Delaware court gave IAC the green-light to proceed with preparing the spin-offs in March. Liberty said on Thursday it had filed with the court this week to ensure it could appeal the ruling if it disagreed with IAC's plans going forward.

Liberty CEO Greg Maffei said the legal step was one way of keeping the company's options open regarding IAC.

"On HSN, we remain open to a transaction if it can be done at an attractive price," Maffei said during a call with analysts to discuss Liberty's financial results. "We haven't done extensive due diligence on HSN, but if you look at the operating structures, it isn't apparent that there are enormous cost synergies."

Last week, Diller said there were no more talks about doing a swap with Liberty before the spin-offs are completed in August and the best route was to take the units public.

"The performance at HSN has certainly improved since the new management team came in," said Scott Devitt, analyst at Stifel Nicolaus. He still does not rule out a deal for HSN with Liberty, but gives an equal chance to it going public.

Devitt values an independent HSN at about $1.6 billion, at a multiple of 8 times earnings before interest, taxes, depreciation and amortization. That is basically on par with his valuation of QVC, held by Liberty Media's Liberty Interactive.

"I've recommended both in the past," Devitt said. "Right now I think you're betting on some sort of corporate action to get a return on the stocks."

Grossman sees a future for the network that allies it more closely with media and entertainment partners, bringing HSN's retail expertise to the discovery and marketing of brands beyond its own channel.

"I believe there is a future opportunity for HSN to live beyond HSN. Why couldn't we power commerce in other lifestyle media?" she said.

She describes HSN as "curating" shopping choices for a community of nearly 4.5 million active customers, helping them spot value more easily as a U.S. economic downturn makes consumers choose their purchases carefully.

HSN's Web site has put up more than 14,000 video clips of its products and has seen growth of more than 20 percent in the latest quarter.

"People are completely frozen by this impotence of abundance," she said. "We can sell a $600 handbag and we can sell a $29 shoe, but we do have a position that we have to feel it's a strong price value."

Reuters/Nielsen