PacCrest ANGI

• Angie's List Inc ANGI shares have surged 53 percent in the last one month, breaching the $8 mark for the first time in 2015.
• Pacific Crest’s Evan Wilson maintained a Sector Weight on the company.
• Wilson believes that the company should not refuse the deal it has been offered by IAC/InterActiveCorp IACI.

IAC has made its offer public to merge Angie's List for $8.75 per share. IAC indicated in a letter it released publicly that it has been unable to begin a constructive dialogue with Angie's List and had decided to make the offer public.

IAC offered either all cash or a stock-for-stock exchange if Angie's List agreed to merge with IAC's HomeAdvisor, which is a competitor for Angie's List.

The offer comes at a premium of more than 50 percent to Angie's List’s share price on October 12, before it received TCS Capital's letter. Following the recent appreciation, the offer implies a 10.5 percent premium on November 11 closing price. Angie's List's board is yet to review the proposal.

Analyst Evan Wilson wrote, “We continue to believe that Angie's List should be a free service. We think IAC has that in the plan, considering its HomeAdvisor business is free for consumers.” He explained that IAC would be able to transition the business to free more easily than Angie's List can on its own as a public company.

Wilson believes that the offer price is fair for Angie's List. “The price represents a multiple of over 18x the midpoint of Angie's guided EBITDA for the year. This is a fair price relative to comparables given Angie's List's recent stumbles and its lackluster turnaround strategy,” the analyst added.

While a merger with HomeAdvisor would be a bold step, there aren’t many other strategic options, Wilson pointed out.