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Thursday, 13 January, 2000, 16:51 GMT
LibertySurf to float

France's answer to Freeserve, LibertySurf, has confirmed that it is investigating a stock market flotation, and announced that it has taken a 10% stake in UK internet service provider X-Stream.

The price tag for the free internet service provider is estimated to be as high as 1.5bn euros (£1bn). Deutsche Bank has been asked to evaluate the option.

The internet firm is owned by UK retail group Kingfisher (45%) and Europ@web, part of the family holding company of Bernard Arnault, the chairman of the luxury goods group LVMH (40%). The remainder of stock is held by LibertySurf's management.

LibertySurf is smaller than Freeserve, but operates along the same business model, offering users "free" internet access and financing its operation through advertising, e-commerce deals and a cut of the phone bill run up by people logging on to the service.

At the end of 1999, after just eight months of operation, the company had attracted more than 600,000 web users, making it France's second largest ISP - after France Telecom's Wanadoo.

In July 1999 the firm bought a majority stake in Nomade, France's largest remaining independent portal.

The company says that its web sites generate about 40 million page views a months.

Freeserve model

Freeserve's owner, electronics retailer Dixons, floated 20% of the company in July 1999, with spectacular results. After a patchy start, Freeserve shares now trade at four times the offering price.

However, the paper reports that the owners of LibertySurf are likely to float a much larger share of the company. If successful, they are set to make millions of euros on their investment.

Given the great interest of investors in internet stocks, a floatation is bound to generate more share holder value than keeping the firm part of the group.

Realising LibertySurf's value could provide a valuable boost to Kingfisher's management.

On Tuesday, Kingfisher shares had taken a hammering on the London Stock Exchange, dropping more than 14% on the news that the profit margins at the company were under pressure.

And last year Kingfisher lost out against US retailing giant Wal-Mart when it tried to take over the Asda supermarket chain.

Kingfisher owns the Comet, Woolworth, Superdrug and B&Q chains in the UK, Dubois Matériaux, But, Castorama and Darty in France, and a number of other furniture, DIY and electronics retail chains in Canada, Poland and the Netherlands.

Web portals like that of LibertySurf are ideal platforms to attract customers to the e-commerce business of these retailers.

X-Stream move

X-Stream co-founder Greg Sukornyk hopes to use Kingfisher's extensive distribution network
Through its French internet operation, Kingfisher is moving back into the UK market as well.

LibertySurf has taken a 10% stake in the X-Stream Network, the UK's first free internet service provider, and currently the country's third-largest.

The investment, worth $5m, will give X-Stream an important financial boost.

Gregory Sukornyk, co-founder and chief executive of X-Stream, described LibertySurf as a financial partner of the "highest calibre" and "vast resources".

He added that the investment represented "a significant step forward in X-Stream's ability to deliver its innovative service to a broad base of users throughout Europe".

X-Stream was founded in March 1998, and now has more than 550,000 registered users world-wide. The company is active in Sweden, Norway, Denmark and the UK.

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