Dixons to float up to 18% of its Internet subsidiary

The UK's biggest Internet flotation began yesterday as electrical retailer Dixons initiated the part-sale of the Freeserve Internet subsidiary.

The flotation, seen as providing a benchmark valuation for Britain's burgeoning Internet business, will see Dixons float up to 18.25 per cent of Freeserve, an outline of the offering showed.

Shares will be available to institutions and private investors who will be able to access a prospectus and application form through Freeserve's own home-page on the Internet.

Individuals will have to apply to buy at least £250 sterling (#381) worth of shares and must register their interest by July 9th.

No price has yet been set on the flotation although analysts have estimated the total market value of Freeserve at up to £1.9 billion.

Sir Stanley Kalms, chairman of Dixons, said: "As an independent quoted company, Freeserve will have greater flexibility in pursuing its strategy in the rapidly growing and evolving Internet sector."

Dixons also announced that Planet Online, a subsidiary of Energis which provides the telecoms infrastructure to Free serve, had agreed to take a 1.75 per cent stake in the flotation.

Meanwhile, as a measure of its long-term confidence in the business, Dixons said it had agreed not to sell any more shares in Freeserve for at least a year.

In the second year after the share offer, Dixons will be allowed to sell 40 per cent of the shares.

As long as it owns at least 50 per cent of Freeserve shares, Dixons will be able to appoint the company chairman, currently Mr John Clare, chief executive of Dixons Group.

But the company said all commercial arrangements between Freeserve and Dixons would be "on a normal commercial basis and at arm's length".

Dixons introduced Freeserve as a free Internet Service Provider last September with access software distributed by stores in the Dixons group including Dixons, PC World, Link and Currys.

In the period to May 1st, Free serve generated revenues of £2.73 million and made a net loss of just over £1 million.

The service has around 1.25 million active subscribers.