$1B European Net Auction Deal in Doubt

UK-based online auctioneer QXL (Nasdaq: QXLC) cast serious doubt Thursday over whether its proposed $942 million (US$) merger with German online auction house Ricardo.de will go forward as planned.

The company issued a terse statement saying it has “received certain information from Ricardo.de in the period following the announcement of the proposed transaction” and it is “evaluating the implications of this information on the proposed transaction.”

Singing a Different Tune

The two companies announced their merger in May, trumpeting it at the time as Europe’s largest e-commerce deal and the foundation of a continent-wide online auction powerhouse that could well rival U.S.-based eBay (Nasdaq: EBAY).

Instead, the merger, slated to be called QXL ricardo PLC, now seems in jeopardy. Industry observers say that QXL would be unlikely to issue such a statement unless it saw something that raised concerns to levels high enough to scuttle the deal.

In May, the two companies said they expected to close the merger by the end of this month.

Red Flags Unclear

QXL has not indicated what might have prompted the statement. Ricardo.de has been relatively quiet in recent months, presumably as it prepared to join the QXL fold.

In April, Ricardo.de reported third-quarter revenues of $7.1 million and a net loss of just over $2 million. Its membership leapt to over 670,000 registered users in Germany, Switzerland and the Netherlands.

QXL had over 500,000 users at the beginning of the year. It recently released financial figures showing that losses in the last quarter increased from $2.8 million in the corresponding quarter of 1999 to $23.3 million.

Primed for Explosion

QXL recently completed its acquisition of Swedish auction company Bidlet AB, increasing its presence in Scandinavia. Last month, it announced an agreement with Lycos Europe to become the premier auction service across the Lycos network in the UK, Germany, France, Italy, Spain and the Netherlands.

The proposed QXL ricardo PLC venture would have paved the way for an expansion to other countries in Western and Central Europe. Like eBay, the two companies intended to become large enough together to stymie the growth of other European online auction challengers.

Analysts are forecasting an explosion in European Internet use and e-commerce shopping.