Lovefilm ponders £100m flotation
Lovefilm, Europe’s largest online DVD rental group, has appointed Goldman Sachs to advise it ahead of a possible £100 million flotation. Goldman is reviewing all options for the business, including a possible sale or a float.
Both Apax, the private equity house, and DLJ Merchant Banking Partners, the investment arm of Credit Suisse, are thought to have cast an eye over Lovefilm. ITV and Virgin Media are also deemed potential trade buyers.
A flotation could value the business, which has operations in the UK, Sweden, Norway, Denmark and Germany, at about £100 million. But an adviser to the company said that a flotation was likely to be a year away.
Lovefilm, whose backers include Esprit Capital Partners, the former Cazenove Private Equity and Index Ventures, allows subscribers to order films online, which are then posted out with a prepaid return envelope.
There is no deadline or “late fees” for returning the fim and once they have been received others can be ordered.
The group, which last year merged with Video Island, also operates rental services for stores including Tesco.
The attraction to buyers lies in Lovefilm’s database of subscribers. In four years Lovefilm has amassed nearly 500,000 subscribers. It generates more than five million postal transactions each month.
The group, which is chaired by Charles Gussara, the former chairman of Virgin Mobile, offers an online film download service and aims to be in prime position to exploit the nascent distribution model as it takes off.
In 2005 revenues from the combined Video Island/Love-film group totalled £25 million.
Online DVD rental is putting increasing pressure on traditional bricks-and-mortar film rental stores such as Blockbuster.
In an attempt to counter the threat the film rental giant has launched its own online rental service and is working to close down underperforming or “nonessential” stores. It is also in talks to acquire Movielink, a Califonia-based online film downloading company.
Screen Digest has forecast that, by 2009, online rental companies will have one quarter of the market in America and one third in Europe.
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