European Net Auction Merger Scaled Back

UK-based online auctioneer QXL (Nasdaq: QXLC) will go ahead with its planned acquisition of Germany’s AG, the companies said Friday, after agreeing on a lower price to reflect a decline in Ricardo shares and financial performance since the deal was first announced in May.

Ricardo shareholders will get 34 QXL ordinary shares for each of their shares, rather than the 42.6 shares originally anticipated. The revised deal values the German online auction company at 171.2 million pounds, while reports valued the original deal at more than 600 million pounds, or about $1 billion (US$).

On August 10th, QXL said it was reconsidering its plan to buy Ricardo because of “certain information” it received from the German company. The deal’s restructuring came three months after May’s merger announcement, billed as Europe’s largest e-commerce deal and a threat to U.S.-based eBay (Nasdaq: EBAY), the world’s largest online auctioneer.

Challenge to eBay

QXL is pushing hard to go head to head with eBay, which already has sites in the UK and Germany and plans to open up in Italy, France and Scandinavia in coming months. QXL, meanwhile, acquired Sweden’s Bidlet AB, boosting its presence in Scandinavia, and last month won an agreement with Lycos to become the network’s premier auction service in the UK, Germany, France, Italy, Spain and the Netherlands.

Ricardo and its majority shareholders have agreed to the new merger plan, which will be voted on by QXL shareholders at a meeting to be held “shortly,” the companies said Friday. The merger is set to be completed in October.

Path to Profit

“The combination of QXL and Ricardo continues to present a strong and competitive business platform from which to achieve both our strategic and financial goals,” QXL chief executive officer Jim Rose said. “We have strengthened our brand presence and customer base throughout Europe, and this deal brings us closer to our objectives of an accelerated path to profitability and to be Europe’s leading online auctioneer.”

Shares of both QXL and Ricardo jumped in Europe following news that the merger is back on track, though both companies’ shares have tumbled since the deal was first announced.

Ricardo Sees Lower Q4 Revenue

Ricardo also said Friday it expects revenue and gross auction value for the fourth quarter ended June 30th to be about 20 percent below third-quarter levels, as it moved more rapidly toward an agency business model and added new commission charges designed to boost future profits. In May, the company said it would take a charge of approximately $2.8 million to reflect “unrecorded liabilities relating to earlier periods and slow-moving inventory.”

Ricardo had about 820,000 registered users as of June 30th. The company operates in Germany, the Netherlands, Switzerland and the UK. QXL has more than 1.3 million registered users. eBay, meanwhile, claims more than 7.7 million.

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