Egg admits defeat in £280m effort to crack French credit card market

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The Independent Online

Egg, the internet and telephone bank, ended its disastrous foray into France yesterday by saying it would finally pull out of the market, in a move which will see 450 jobs lost and cost £113m.

Egg, the internet and telephone bank, ended its disastrous foray into France yesterday by saying it would finally pull out of the market, in a move which will see 450 jobs lost and cost £113m.

The move came after Prudential, Egg's majority owner which has been trying to sell the business since January, admitted it had been unable to find a buyer who would have been prepared to take Egg on if it was still operating in France.

Sources said yesterday that MBNA, the US credit card giant, was now in pole position to buy Egg, having first registered an interest in it early this year, but having wrangled with the insurer over the price.

Including the funds required to pull out of the country - where labour laws are stringent and redundancy payments are generous - Egg, whose chief executive is Paul Gratton, will have spent about £280m on trying to break into the French credit card market.

The investment proved to be ill-fated, with Egg having to admit last October that French consumers had been slow in taking up British and American habits of spending large sums on plastic.

The company, in which Prudential holds a 79 per cent stake, said it would try to find a partner to inject extra funds into carrying on with the project in the hope it would take off.

While no one stepped forward to form a joint venture, the process did elicit possible buyers for the whole of Egg. As well as MBNA, Royal Bank of Scotland and Capital One, another American credit card business, expressed serious interest.

However, those close to the process have said it has been fraught with problems because buyers refused to pay the price Prudential wanted. Part of that disagreement is thought to have centred on the French operations, with buyers telling Prudential they would not pay a premium to Egg's share price if they also had to find the money to exit from France. Prudential issued a statement to the Stock Exchange saying it "remained in discussions regarding a possible transaction". The focus will be on whether Prudential makes significant progress in the next few weeks, as it will have to update the market on its interim results on 27 July. Egg's half-year figures will be published on 22 July.

While RBS was initially the front-runner to buy Egg, it pulled out a few months ago because its chief executive, Fred Goodwin, did not agree with the value placed on Egg by Jonathan Bloomer, Prudential's head.

In April, Prudential restarted the auction, which is being handled by Goldman Sachs, with MBNA. Prudential is thought to have reduced its initial price target of £1.6bn to about £1.4bn - a premium to the 160p price at which Egg floated in June 2000.

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