From Financial Times today: Freeserve announces public offering soon check out the valuation...
Monday June 7 1999
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FTIT
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Companies News / UK & Ireland
Dixons to announce Freeserve flotation
By Christopher Price
Dixons, Britain's biggest
electrical retailer, will shortly
announce a public offering in
Freeserve that could value the
nine-month-old internet services
business at between £500m and
£2bn.
The move follows a strategic
review by Credit Suisse First Boston and Cazenove,
Dixons' financial advisers, of the options available for
Freeserve, Britain's most popular internet service
provider. These included a public offering, trade sale and
investment from strategic partners.
The large range in analysts' valuations underlines the
difficulties involved in trying to put a price on loss-making
internet businesses. It also reflects Freeserve's
uniqueness in being both a free internet service provider
and an internet portal offering a range of on-line services.
Dixons' decision to opt for a flotation and the large
syndicate of bankers it is understood to have assembled
to handle the deal suggest that the retailer is confident of
a good valuation.
CSFB and Cazenove are expected to be joined by
Dresdner Kleinwort Benson, ING Barings, Merrill Lynch
and Schroders in a 10-strong syndicate handling the
offering.
Freeserve became Britain's biggest internet provider, with
more than 1.5m registered users, after launching the first
mass market free internet service in September. Its
success forced dozens of subscription-based service
providers to reduce or scrap their fees.
Dixons refused to comment on details of any proposed
listing. However, analysts suggested that the company
may be considering using Freeserve's financial services
channel in order to sell shares to users as part of the
offer.
If it succeeded in persuading users to become
shareholders, it would go some way to disarming critics
who question Freeserve's ability to promote customer
loyalty in the face of a plethora of free internet service
providers.
Another question involves the role of Energis and its
subsidiary Planet Online - which provide the telecoms
systems and modem support for Freeserve - in the
flotation.
Although it is understood that Energis does not currently
have a stake in Free-serve, the huge amount of traffic
being generated by the internet service is believed to
have prompted the contract between Dixons and Energis
to be renegotiated. This could include an equity interest
in Freeserve, analysts speculated.
Dixons has been strengthening Freeserve's
management. John Pluthero, the Dixon's executive who
developed the Freeserve concept, was appointed chief
executive of the internet venture last month. Nicholas
Backhouse has since been recruited from ING Barings
as chief financial officer, while David Melville has joined
as company secretary and general counsel from Argos.
This year has also seen Freeserve developing its portal
strategy, adding services such as discount telephone
charges.
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