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Egg, the UK-based Internet bank backed by Prudential, confirmed that it may seek to expand into France with the purchase of a majority shareholding in Zebank.
Egg released a statement on Monday in response to reports in French newspapers over the weekend that it was in advanced talks with Zebank's owners, Groupe Arnault and Dexia. "Egg confirms that it is in exclusive discussions with Groupe Arnault and Dexia which may or may not lead to the acquisition of a majority holding in Zebank," the Egg statement said. "In parallel Zebank is pursuing discussions with certain French retailers to secure distribution arrangements."
Zebank presents an opportunity for Egg to step up its expansion plans into mainland Europe. Despite multiple casualties in the on-line banking space, including the withdrawal of rival First-e from the UK market, Egg is proving a survivor in the market and announced in November that it had recorded a net profit during the month.
Zebank has not fared so well, suffering from technical hitches that delayed its launch by more then a year in France. Its majority shareholder, with 80 percent, is 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 the spectacular failures of his EUR500 million investment fund Europatweb, established in 1999. Investments included small holdings in the bankrupt companies Boo.com and grocer Webvan, as well as a 38 percent stake in Liberty Surf, the free French Internet service provider which lost more than 80 percent of its value before Arnault sold it off to Tiscali for just USD10 per share.
Zebank, originally envisioned as a multi-purpose financial portal designed to shake up the local banking industry, was finally launched in February 2001. As of October the company said it had opened 35,000 accounts and was aiming for 60,000 accounts by March of 2002. By last autumn there were multiple reports in the French media that Zebank was seeking a partner or a purchaser to bring the operation to the next level.
According to media reports Dexia, the French-Belgian financial services group which owns 20 percent of the on-line bank, has not indicated any willingness to boost its investment in Zebank. As of 10 December Egg had 1.92 million customers and said it still had cash reserves from its float in June 2000, which raised STG150 million.
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