Pipex has confirmed that it is selling its consumer voice and broadband division to Tiscali in a cash deal valuing the business at 210 million.
The confirmation follows months of speculation that the company was mulling over a prospective sale or demerger of all or part of its business, following news that it had enlisted the help of UBS as a financial adviser to help it reach a decision.
Pipex's business division will remain part of the Pipex Group, meaning that the company will now be comprised of three business units: web hosting, business services and Pipex Wireless, which is responsible for its WiMax activities.
"Over the past three years, Pipex has successfully transformed the scale and quality of its broadband and voice customer base. In the consolidating UK market, today's announcement crystallises value for shareholders, and ensures that Pipex's customers will continue to receive a wide range of competitive, high quality communications and internet services," said Peter Dubens, Pipex's executive chairman.
"The strategic review announced in March remains in progress regarding the group's other businesses, which continue to show strong growth in all areas. The group is also reviewing options for the efficient distribution to shareholders of the proceeds from the sale of the broadband and voice division. Further updates will be provided in due course."
The acquisition will result in Tiscali boasting a UK broadband user base of 1.9 million customers.
"Upon completion of the Tiscali Group's strategic refocusing and delivery of the group's financial targets, the acquisition of Pipex's broadband and voice division represents the first step in the new development phase. In the UK, our position will become even stronger as our growth accelerates," said Tommaso Pompei, Tiscali's chief executive.
"It will increase our broadband market share to approximately 15 per cent, place Tiscali as one of the largest alternative broadband, voice and media provider in the UK and further complement the recent acquisition of Video Networks Limited [known as HomeChoice]. Following the acquisition, the 2008 net income and free cash flow generation targets are confirmed, with a net financial position to EBITDA ratio expected to remain under three times."
Confirmation of the sale may have left some customers under a cloud of uncertainty as to what it means to them.
Communications giant Cable & Wireless was keen to clear up any confusion for users connected to itself and Pipex. "We're very happy to confirm that the contract we had with Pipex remains in place under the new Tiscali ownership," it said in a statement.
"With the Bulldog customer base remaining on our network, we're working closely with Tiscali to identify other opportunities beneficial to both companies and of course to our end customers. Our number one priority is to give our customers excellent levels of service - we're looking forward to showing Tiscali just what we can do."
