eBay in the frame after QXL Ricardo confirms early bid talks

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The Independent Online

The online auctioneer QXL Ricardo, one of the survivors of the dot.com boom, surprised investors by confirming rumours that it was in early talks which could lead to an offer being made for the company.

The online auctioneer QXL Ricardo, one of the survivors of the dot.com boom, surprised investors by confirming rumours that it was in early talks which could lead to an offer being made for the company.

At yesterday's price, any offer would value the group at about £8.5m, less than one-thousandth of its capitalisation at its peak. Informed observers believe that the most likely suitor is eBay, whose recent spending spree continued on Thursday when it paid $290m (£156m) for the privately held Marktplaats.nl, the Dutch classified advertising website. That purchase comes on the back of several overseas raids by eBay in 2004, including the acquisitions of websites in India and South Korea, as the company rapidly expandsoutside its core US market.

QXL has not made a profit since floating in 1999. The company consolidated its shares in March 2003 on a 1,000 for 1 basis after they fell to less than a penny, having peaked in April 2000. However, the company has announced improving revenues and cash flow and is expecting to become profitable in the first quarter of 2005. Tom Parkinson, the company secretary of QXL, said: "We are feeling much more confident, not just cutting costs but growing revenue as well."

The winter months are the strongest trading period for QXL, as the cold weather and short days mean more Scandinavians opt to do their shopping online. Switzerland is one country where eBay competes head-to-head with QXL and where QXL comes out on top. The company has approximately a 65 per cent market share in Switzerland, while eBay, despite its global reach and huge size advantage, hasa 35 per cent market share.

QXL is fighting a legal battle in Poland to regain control of its business there. The Polish management is accused of diverting revenue to their own trading company in spite of it going through QXL's website. Should the company regain control of its Polish business, another emerging market where eBay does not operate, turnover would double overnight.

Based on total value of goods auctioned, the Polish arm of QXL is as big as the rest of the company put together. EBay has no operations in Scandinavia or in Eastern Europe.

Some observers believe that a large premium is unlikely. One City source said: "I am surprised at this [takeover] announcement.... If it is eBay, it would be an unusual purchase because they normally buy large-scale businesses."

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