Thomson of Canada set to buy Dialog Corp

Dialog Corporation, one of Britain's first IT firms to embrace the internet, was close to being sold last night to Thomson, the Canadian electronic information giant, so ending the financial haemorrhage caused by founder and chief executive Dan Wagner's ambitious expansion.

The sale, which is likely to be announced this week, will recoup little more than the £170m debt remaining from the 1997 acquisition of parts of Knight Ridder Information for $420m. For the consideration, Thomson will take control of Dialog's information services arm, which accounts for over 90 per cent of annual sales and earnings.

A new company, to be called Bright Station, will assume Dialog's market listing. Headed by Mr Wagner, it will consist of the firm's e-commerce and Web solutions divisions whose brands included WebCheck, a search engine, and Office Shopper, an online office equipment supplier.

Neither Dialog nor Thomson were prepared to comment.

For Mr Wagner, the sell-off will provide an opportunity to reapply his entrepreneurial energy to a fast-moving IT start-up. In addition to taking on Dialog's debt, it is believed that Thomson and an unknown privately owned company will both invest in Bright Station.

"Bright Station is much more Dan's cup of tea than Dialog," said an adviser to the company. "It suits his preference to move quickly and develop new products. Dialog was a fairly stifling environment."

Founded in 1982 under the name of MAID when Mr Wagner was just 21 years old, the company listed on the stock exchange in 1994. A year later, MAID listed on Nasdaq and raised $40m to develop software to take its business information service on to the internet.

Although the firm repaid early investor confidence, that began to change after it bought KRI and renamed itself Dialog. In recent years, it was starved of investment funds owing to debt charges and suffered at the hands of well-financed rivals such as Reuters and Dow Jones.

Dialog stock rallied 28 per cent to 231.5p yesterday after it confirmed itwas in "advanced discussions" with a third party. The deal will also feature a strategic alliance with Thomson which will licence aspects of Dialog's online technology and software.