Pipex, Britain’s fifth-biggest internet service provider, has agreed a £210 million deal to sell its broadband base to Tiscali.
The internet group announced today that it has reached an agreement to sell off Pipex’s one million consumer and small-business customers to its Italian rival.
Pipex, chaired by Peter Dubens, had hoped to sell off its entire business. It had put a price on the whole group of about £400 million. As well as offering broadband services to consumers and small businesses, Pipex, whose brands include Freedom2surf and Toucan, provides internet hosting services. It also has a Wi-Max venture with Intel.
It is understood that prospective buyers for the Pipex group were deterred by the difficulty and cost of integrating Pipex’s broadband customers into their own businesses.
Pipex has been built up through a series of acquisitions over several years. The sale of the business, which had been eyed by several players, including BT, marks the end of one of Britain’s last independent broadband customer bases.
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A rush to grab market share in high-speed internet has already seen a slew of tie-ups in the sector. Last year the UK arm of AOL was snapped up for £370 million by Carphone Warehouse. The satellite broadcaster BSkyB secured the broadband provider EasyNet in a £211 million deal in 2005. Virgin Media, the cable group, is currently being stalked by Carlyle, the private equity firm.
Pipex’s move to exit now is thought to have been triggered in part by its unwillingness to keep up with the big-name brands crowding the high street and their “free” broadband offers by ploughing money into advertising and marketing.
Tiscali, which has itself been regarded as a potential target, has insisted that it is not for sale.
After merging with HomeChoice, the video-on-demand service, last year, it is determined to forge ahead in competition with players like Virgin Media and BT.