Online auctioneer poised for takeover

A former darling of the dotcom boom was today on the brink of being sold for €17m – four years after being valued at €2.1bn.

QXL Ricardo, an online auctioneer that was once tipped to be Europe’s answer to eBay, said a 700p-a-share offer had been tabled by its management team.

The approach was recommended by independent directors as “fair and reasonable” as QXL has yet to make an annual profit and faced challenges in key markets.

Investors paid €929 for each share of QXL at the time of its flotation in 1999, but then saw their value fall to just €1.43 at the start of this year.

Shares have rallied since then and rose a further 40% today to €9.58 after the recommended offer from Tiger Acquisition Corporation was confirmed.

Tiger Acquisition is backed by US private equity firm Great Hill Partners and involves QXL chief executive Mark Zaleski and two other directors.

QXL, which operates in 10 European countries, was founded by former Financial Times journalist Tim Jackson in 1997.

Members of its websites buy and sell goods such as sports gear, electronics and collectibles – worth more than €28.6m in the three months to June 30.

Explaining their decision to recommend the bid, independent directors said QXL had yet to make an annual profit and is unlikely to be able to pay a maiden dividend “for the foreseeable future”.

QXL is facing strong competition in the UK and Germany, while its strong positions in Norway, Denmark and Switzerland could be challenged unless investment in technology and marketing was increased.

But they said investors were reluctant to put money into firms “without a proven track record of profitability” and this made it difficult for QXL to secure additional finance.

In its most recent market update, QXL said it reduced half-yearly losses to £547,600 from €8.6m previously, while turnover was 62% higher at €4.3m.

The firm has switched its focus from rapid expansion to cost saving over the past two years, working to improve its sites and pulling out of under-performing parts of its business.

The independent directors today said they were “encouraged” by the performance of QXL over summer and cash flow had been better than expected.