STAKES IN EUROPATWEB SOLD
Byline: Robert Murphy
PARIS — Europatweb, Bernard Arnault’s Internet development vehicle, and British retailer Kingfisher said on Monday they would sell their stakes in Liberty Surf, the free Internet service provider they founded jointly in 1999, to telecom and Internet player Tiscali for more than $600 million in cash and stock.
While disclosing it will pay $615.2 million to acquire Liberty Surf from Europatweb and Kingfisher, Italy-based Tiscali further noted it will offer to purchase outstanding stock in the Internet access provider, at $9.33 a share. Shares of Liberty Surf ebbed 8.57 percent to close at $6.08 Monday on the Paris Bourse. (All dollar figures are converted from the euro at current exchange rates.)
Europatweb and Kingfisher both hold a 36.47 percent stake in Liberty Surf.
“We are delighted with Liberty Surf’s continuing success and welcome Tiscali’s offer, which is an important further step both in the sector’s consolidation and in the creation of an independent pan-European leader,” Arnault and Kingfisher ceo Sir Geoffrey Mulcahy said in a joint statement.
Tiscali, which late last year purchased Netherlands-based ISP World Online, now counts some 4.9 million subscribers with the anticipated acquisition of Liberty Surf, which will bolster its position in the French market. It is widely believed that as the ISP market consolidates in Europe, only a handful of large access providers will manage to survive.
Market sources said Liberty Surf was put up for sale in November, soon after French utilities group Suez Lyonnaise des Eaux acquired a 30 percent stake in Europatweb. As noted in WWD, Liberty Surf was excluded from that deal, as were the LVMH-Europatweb joint venture eLuxury.com; Aka Technologies, a joint venture formed in October with Accel-KKR to promote online strategies; and Zebank, the e-bank launch delayed by technical challenges, which Arnault now plans to launch early this year.
When Europatweb disclosed on Nov. 20 that it had agreed to sell the stake to Suez Lyonnaise, it said the deal valued the four sites excluded from the transaction at a combined $800 million, and projected that those sites would be grouped together into a yet-to-be-named company. Particular attention was paid to Zebank at that time, with Arnault flashing a cobranded Zebank-Visa credit card at a press conference and predicting the nascent Web site would become a “big, successful venture.” The 46 Web sites included in Europatweb’s deal with Suez have remained under the Europatweb umbrella and were valued, in the Suez Lyonnaise transaction, at approximately $860 million in aggregate.
According to market sources, Liberty Surf has some room to build its business, even though it’s already France’s second largest ISP, because, they said, it has underperformed in terms of stickiness, or the amount of time users spend on the portal at libertysurf.fr. Currently, Liberty Surf lists about 1.1 million active subscribers, ranking it behind Wanadoo, the France telecom-run provider that claims about 2 million subscribers.
Kingfisher and Europatweb will each receive about $67.5 million in cash from the sale of their Liberty Surf investment, as well as 12.2 million shares in Tiscali. The stake in Tiscali represents 3.5 percent of the Italian telecom and Internet company and was worth $156 million at the close of business on Jan. 5.
A Kingfisher spokesman declined comment on whether Kingfisher would sell its Tiscali shares. But he confirmed the company’s Internet strategy is focused on Web sites for its own brick-and-mortar retail stores, which offer general merchandise, consumer electronics and hardware.
Europatweb officials declined to comment beyond their prepared company statement.
Signaling his belief in the future of the Internet, luxury titan Arnault established Europatweb in July 1999 as an investment firm with a bank account of roughly $500 million. What began mostly as a venture capital Internet firm, shifted focus last summer to become an industrial group that operates companies as well as investing in them. Commenting on Europatweb’s shift in November, when he revealed the deal with Suez Lyonnaise, Arnault said: “We still have an entrepreneurial bent, but with an industrial concentration on building synergies between the content and managerial squads of our existing sites.”