Struggling Internet directory company Scoot.com is to sell classified advertising newspaper Loot to the Daily Mail Group Trust (DMGT) for £45m, in an attempt to avert financial disaster.
Scoot is also receiving a bridging loan of £10.5m as part of the transaction, which also includes the transfer to the Daily Mail of almost 91 percent of the equity shares of B&S Ltd, the publisher of the Buy and Sell newspaper in Ireland. The deal will enable Scoot to repay an impending £14m loan, leaving it with enough cash to survive another six weeks, according to the company.
Shares in Scoot rose almost 30 percent -- from 2p to the heady heights of 2.9p -- when investors heard the news, bringing little cheer to anyone who invested in the company when its share value topped 300p back in spring 2000.
"The Company's recent strategic review has sought to identify the most effective route to maximise stakeholder value. Of the options explored in this review, the sale of the Loot business, combined with a bridge financing facility has been selected," explained the company in a statement released on Friday morning. It is thought that a number of companies were interested in buying Loot, with the DMGT winning the auction.
The sale price of £45m means that Scoot is accepting a massive loss, having bought Loot for £190m last year. "To be honest, we see this principally as the purchase of a print publication," DMGT finance director Peter Williams told ZDNet News. "Of course, Loot's Web site gets 24 million page impressions per month, so we're well aware that there are interesting online opportunities," he added.
It's not totally surprising that the DMGT hasn't decided exactly what it will do with Loot, given Scoot's urgency to raise capital. "The whole deal took place in a bit of a rush, because of issues on Scoot's side," admitted Williams.
DMGT existing Internet interests include Fish4, which advertises jobs, houses and cars online. It also owns Thisismoney.co.uk and Thisislondon.co.uk -- the Web presence of the Evening Standard newspaper, but Williams doesn't think that the purchase of Loot will necessarily cause any problems. "In many ways the different Web sites are complementary, as Loot specialises in letting people buy and sell things directly between each other. For example Thisislondon will have adverts for houses for sale, but not for rent," Williams explained.
There have been rumours circulating recently that Scoot would be forced to offload Loot. According to sources close to the company Scoot owes money to at least one firm that has been working for it. A spokeswoman for Scoot refused to confirm or deny this suggestion.
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