IAC has sold Entertainment Publications Inc., publisher of The Entertainment Book, to MH Equity Investors. The deal puts $135 million on the books for IAC, although MH Equity, an Indianapolis company, probably paid only a portion of that in cash. IAC paid $280 million for the property in 2004, but recently wrote down $100 million of the investment.

Under the new ownership structure, EPI’s strategic direction and management team will remain in place with MaryAnn Rivers continuing as chief executive officer. The company, which has high-value (i.e., 2-for-1) promotions for 200,000 merchant locations in more than 150 markets, has roughly 800 employees.

IAC has apparently had the company on the sales block for some time. In recent months, IAC has been more motivated to unload the unit as it gets ready to downsize to a group of core properties under Barry Diller. The downsizing has also seen the departure of some key executives, including IAC CEO Peter Horan, who has just taken the top post at Goodmail Systems.

For IAC, EPI probably never lived up to its hypothetical potential. Efforts to transition the businesses from free inclusion to paid Web-based advertising and CRM relationships had mixed results. While EPI reports the same number of listings as it did several years ago, some businesses, pressured to upgrade to an advertising relationship, simply quit allowing their offers to be featured.

Although advertising hasn’t been as strong as anticipated for a book/Web site duo, the company still made money on unit sales. The 12-month books initially sell for $24.95 to $45, with proceeds split with nonprofit sales channels (i.e., Boy Scouts). In recent years, however, IAC has concentrated more on direct sales, which have higher renewables.

Synergies with other IAC units also proved to be elusive. In efforts to promote more book sales, and more online coupon usage, there had been attempts to create a virtuous circle with other IAC properties, such as HSN, Cornerstone Brands, Shoebuy, Citysearch, SeviceMagic and Evite.

While EPI was ultimately an under-performer for IAC, MH Equity seems to have plenty of potential upside, including use of the valuable “Entertainment.com” URL. Even if there has been a drop off in listings, Entertainment still has a very significant and widely distributed number of listings.