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Zebank, launched in February 2001 following a number of technical hitches, has some 70,000 customers in France and is backed by interests including Groupe Arnault, the investment vehicle of Bernard Arnault, chief executive officer of the luxury goods company LVMH.
Arnault is most famous in Internet circles for some of the spectacular failures of his EUR500 million investment fund Europatweb, including Boo.com and grocer Webvan. Zebank's minority shareholder is Dexia, a Belgian-French financial services group.
According to terms of the deal, which is subject to regulatory clearances, Egg will acquire 100 percent of Zebank for EUR8 million (around STG5 million) in cash. But the agreement will also see Groupe Arnault and Dexia pump EUR30 million in cash into the business during the period between signing and completion of the deal, for which they will be reimbursed.
Egg is to distribute its banking and financial services under its own brand in France, it said, and will carry out a "significant" business-to-consumer launch there later this year.
"This is an important step as we expand our operations and begin to establish Egg as an international brand," Egg chief executive officer Paul Gratton said in a statement.
Important to new customer acquisition will be Zebank's distribution agreements with French retail outlets including La Samaritaine supermarkets and the perfume and cosmetics chain, Sephora. Currently Zebank's user base is 70 percent male and are high earners centred mainly around Paris. Another major distribution partner is MSN in France, the second largest portal in the country with around 7 million users.
In addition to the upfront acquisition cost, Egg said it expects to invest STG50 million in brand and marketing spend and STG15 million in development costs over a three-year period, by which time it is aiming for 1 million customers. Egg said the French business is planned to break through into profit by the end of 2004.
Zebank currently has approximately 300 employees, and Egg said it expects this number to increase over time in line with its expansion plans for new business lines. Egg also plans to keep Zebank's current management team in place, including Olivier de Montety as directeur general.
Already Egg claims some 2 million customers for its financial services products which include on-line banking, credit cards and insurance. In its statement released on Tuesday, Egg said its UK business, which attained profitability in November 2001, "is now sustainably profitable."
Although Egg is paying just STG5 million in cash for the business, it said the total size of the profit and loss investment in the first three years in launching the business and acquiring the customer base is expected to be approximately STG100 million, including the STG65 million in brand and development costs.
France is an important market for Egg, with 22 percent of Internet users already banking on-line and 45 percent expected to do so by 2005, according to research from Forrester.
Egg said it expected the Zebank deal to be complete in the first half of 2002.
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