Freeserve falls on bid blow

UK internet service provider Freeserve has said it does not expect a takeover bid for the whole company in the near future.

The news, plus the reporting of a £19.7m loss for the past year, led to its shares tumbling 20% on Monday morning before recovering slightly. The stock closed at 365 pence, down from 438.75 pence.

The company confirmed that it had been in talks with several different companies, including Germany's T-Online.

It said talks were ongoing but added that it did not expect them to result in a bid in the near future.

Freeserve's parent company Dixons saw its share price fall as well, closing with a loss 7.2%.

Deal still possible

"We are in talks with a number of others," said chief executive John Pluthero.

"The sale takes all sorts of form and flavours," he said.

"We remain on excellent terms with T-Online, and a number of discussions are ongoing - you can draw your own conclusions from that," Mr Pluthero said.

He was unperturbed by Freeserve's sharp fall, saying that it was because investors had been expecting a deal.

Results a day early

Amid the continuing speculation surrounding the company's future, Freeserve announced its full-year pre-tax loss a day earlier than expected.

Its losses widened to £19.7m, in line with market expectations, while sales were £19.56m and operating losses £17.5m.

On a more positive note, the company said its active registered accounts rose 64% to 1.93 million.

Dixons' web offshoot is the UK's biggest internet service provider and T-Online - already Europe's biggest - was understood to be the front-runner in the race to snap it up.

Differences are reported to have centred on the higher rates of pay at Freeserve compared with T-Online and incompatibility in management styles.

Terra or NTL

There is also said to be concern that Freeserve's management might leave after cashing in their share options.

Dixons' 80% stake in Freeserve has a market value in excess of £3.5bn.

T-Online, which is part of Deutsche Telekom, has indicated that it is not prepared to overpay for Freeserve and that it is interested in other ways of entering the British ISP market.

It is said to be actively exploring these with its UK mobile phone operator One2One.

With T-Online stepping back, US cable company NTL and Spain's Terra Networks are thought to be interested in furthering their proposals for a deal with Freeserve.

Since Freeserve floated last July, ten months after it was founded, Freeserve's market capitalisation has fluctuated between £1.8bn and almost £10bn.