Barry Diller, former head of the Paramount and Fox movie studios, agreed to sell his stake in Vivendi Universal Entertainment for $3.4 billion as he focuses on Internet retailing and services.

Mr. Diller’s IAC/InterActiveCorp, owner of the HSN home-shopping network and Expedia, will sell its 5.4% stake in the television, movie, and theme-park business to NBC Universal, the companies said in a statement yesterday. The transaction will add to IAC’s earnings per share immediately, Chief Financial Officer Tom McInerney said on a conference call yesterday.

The agreement ends tax-related litigation between IAC and Vivendi Universal SA, freeing Mr. Diller to pursue his purchase of Web search engine Ask Jeeves and compete for online advertising. Mr. Diller, 63, is also preparing to spin off his online travel businesses including Expedia to try to boost its valuation.

“This is a company that’s been punished for its complexity the past few years,” said Ryan Jacob, chairman of New York-based Jacob Asset Management. Vivendi “is not something core to them. They weren’t getting the full value in their stock for holding this security.”

Shares of New York-based IAC rose $1.17, or 4.8 percent, to $25.81 at 4 p.m. in Nasdaq Stock Market composite trading. They’ve lost 16% in the past year. Vivendi shares declined 0.2% to 24.78 euros in Paris. Under the terms, Mr. Diller gets back 56.6 million shares in his own company valued at $1.4 billion, $865 million from cashed treasury bonds that were part of IAC’s earlier transaction with Vivendi Universal, about $720 million in cash from the General Electric, and $235 million from Vivendi, said GE spokesman David Frail. GE controls 80% of NBC Universal and Vivendi holds the rest.

IAC said it also gets about $100 million worth of advertising across NBC Universal’s platforms. After taxes, IAC will have a gain of $330 million from the deal and receive about $1 billion in cash.

“We’re happy with it,” said Peter Supino, who helps manage $8 billion of assets at Wallace R. Weitz & Company in Omaha, Neb., including shares of IAC. “It’s a big improvement on the way they had it on the books. The credit rating agencies are happy to see some cash inflows.”

Mr. Diller declined on the call to specify what the company will do with the cash. He said IAC doesn’t have “big eyes” for another acquisition and could return cash to shareholders in the form of a share repurchase and wants to maintain an investment grade with credit rating agencies.

“There is nothing that we need to fill in,’ so to speak,” Mr. Diller said on the call.

For Vivendi Universal, the deal ends lawsuits regarding potential tax liabilities connected to IAC’s stake in the entertainment partnership.

“This draws a final line under the relationship between Vivendi and Mr. Mr. Diller,” Vivendi Chief Executive Jean-Bernard Levy said on a conference call. “We’re avoiding risks that could have cost us $1 billion.”

Yesterday’s deal stems from Mr. Diller’s 2002 sale of his cable television networks including USA, Sci Fi Channel, and Trio to Vivendi Universal, which put the assets into its entertainment unit. As part of the agreement, IAC got a 5.4% stake in the entertainment business.