Lastminute's French Connection

LONDON (08/15/2000) - In March, British late-deals travel site Lastminute.com PLC made one of the last blockbuster IPOs, just days before Europe's latest e-commerce malaise set in, raising £113 million (US$169.5 million).

Observers thought it would lay-low after sustaining a hail of adverse PR when the market took a downturn. But Monday it announced it had spent nearly half that amount in cash and stock to acquire Degriftour Group, France's largest e-commerce operation, for £58.9 million ($88.35 million.)Degriftour Group is an anachronism in e-commerce. Launched in 1991 on France's beloved Minitel system, it was profitable from the start and quickly became the second-most popular Minitel service, only bettered by the site that keeps track of French train schedules. Degriftour launched a sister site on the Internet in 1996 and built a customer base of 250,000.

Lastminute.com, which specializes in selling distressed travel inventory at short notice, has 108,000 customers and 2.1 million registered users.

Lastminute.com customers generally book last-minute travel seven days in advance; many book for the following weekend or the next day.

The combined company earned £10.3 million ($15.45 million) on £64.1 million ($96.15 million) total travel bookings in the year ended March 31.

Lastminute.com reported losses of £9.27 million ($13.87 million) in the quarter ended June 30, down from £11 million ($16.46 million) for the same period last year.

Still, Lastminute.com's shares have taken a beating ever since its high-profile offering in March. Lastminute's stock was up 2.5 percent on news of the acquisition, but at 165.5 pence ($2.48) it is st ill trading below its offering price of 380 pence ($5.70).

Lastminute.com executives stressed that the acquisition of Degriftour would speed Lastminute.com's trajectory to profitability. "They are a pure online business and they are profitable," says Lastminute.com finance director Julian Culhane.

"[The deal] achieves today what our business plan would have take two to three years to achieve in France," said Lastminute.com CEO Brent Hoberman in a statement.

Lastminute.com has negotiated deals with 3,500 airlines, rental car companies, hotels and tour operators to resell seats, cars and rooms that might otherwise have gone unsold. Degriftour has 6,000 such negotiated deals with travel vendors in France.

Degriftour has 50 percent of France's e-travel marketplace and is known by 45 percent of the French public, according to a phone survey in March. But they were an almost exclusively French business with no way to expand into Europe.

"It's a big move for us to become global and pan-European," says Frederic Ballat, Degriftour deputy general manager.

Ballat attributes Degriftour's success to Minitel, a text-based information service developed by the French government in the early 80s. Even in the age of the Web, an estimated 20 million French still use their Minitel terminals.

Ballat says Minitel helped the French become accustomed to buying online and Lastminute/Degriftour will continue to support it as long as customers use it.

"Minitel is not a dead body," Ballat says. "The French are used to buying holidays electronically."

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