Dixons shares soar on plan to cash in on Internet boom

DIXONS, the electronics retailer, is preparing to cash in on the soaring value of Internet stocks by floating off a part of Freeserve, its popular free Internet service which is valued at up to pounds 4bn by analysts.

Shares in Dixons jumped more than 8 per cent yesterday, adding more than pounds 500m to the value of the group, on news that it had appointed Credit Suisse First Boston and Cazenove, the merchant banks, to "explore the strategic alternatives available to Freeserve". The options include a potential flotation of a minority stake in the service.

John Clare, Dixons' chief executive, said an independent stock market listing might make it easier for Freeserve to make acquisitions and form alliances with other internet companies.

"For Freeserve to grow and prosper it might be advisable for it to have its own individual paper," he said, adding that Freeserve shares might also appeal to a different investors than Dixons shareholders.

"The core of Dixons is a rather different business which has different criteria for things like return on capital," he said. Freeserve has transformed the Internet industry in the UK since it was launched last September. Already 1.1m regular customers have signed up, making it our largest internet service provider.

The service, which pays for itself through a slice of the local phone call charges racked up by users, has prompted a host of other companies to follow suit. Organisations including British Telecom, Tesco and The Sun have launched their own free Internet services.

The amount of Internet traffic that passes through Freeserve's website has prompted analysts to start viewing the business as a portal - a site used by surfers as a gateway to the rest of the Internet. In the United States, portals such as Yahoo! and Excite have attracted huge valuations in recognition of their ability to sell advertising and conduct electronic commerce.

By comparing Freeserve to US internet stocks, analysts put a value of up to pounds 4bn on Freeserve - more than Dixons' traditional business, which includes the PC World and Currys chains. But Freeserve has yet to show it is able to generate revenues from the traffic to the site. Most of the local call revenues are pocketed by Energis, which provides the physical backbone for the service.

What's more, much of Freeserve's implied value is already reflected in Dixons' shares, which have more than doubled since the service was launched. Yesterday, they closed up 114p at 1564p.

The path to a flotation was laid earlier this year by an internal restructuring at Dixons which separated Freeserve from the rest of the business and gave it its own operating board.

Analysts generally welcomed the move but warned that Dixons should not attempt to raise cash from a flotation. "The fact is it's not theirs to sell. It belongs to the shareholders," one expert said. "And anyway Dixons is already laden with cash."

Other options for Freeserve could include issuing a tracking stock - a virtual share which tracks the performance of the business - or selling the service outright to a US group.

But experts pointed out that any buyer would be likely to want to pay for the business in shares, making a deal less attractive.

Suggested Topics
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Technical BA - Banking - Bristol - £400pd

£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice