AOL ‘to offload Bebo for under $10m’

AOL is set to offload Bebo to US private investment firm Criterion Capital Partners at a “fire sale” price potentially below $10m.

AOL, which acquired the social networking website just over two years ago for $850-million, is expected to announce the fate of Bebo on Friday or Saturday.

The suitor that has emerged is Criterion Capital Partners which specialises in turning around companies with revenue between $3-million and $30-million. In the UK Bebo plunged into the red last year as post-tax profits fell 143% to the end of May 2009.

The price tag that has been put on the deal is somewhere between $2,5-million and $10-million, according to a report.

The Wall Street Journal cited one source as saying the exact figure was “an exceptionally uninspiring number” with almost total “value destruction”.

Analysts were somewhat surprised that AOL has found a buyer, believing Bebo would require massive investment to rejuvenate and and only has a meaningful presence in the UK & Ireland.

Ovum principal analyst Eden Zoller said there had seemed little chance of AOL finding a buyer until now.

“Bebo has a shrinking member base, a brand that no longer resonates and what looks to be a fairly mediocre platform given the lack of investment and pretty non-existent developer community,” said Zoller. “It also has an uneven geographic footprint and is not making any money, although … few social networks are.”

AOL, which said in April that it wanted to either sell or shut Bebo, completed a strategic review of the website last month.

Some observers thought that AOL would opt for the latter option because complicated corporate tax rules would allow the company to write off the full purchase price. It is thought that AOL’s sale has been structured to allow it to still be able to write off the purchase in some way to save the company a significant amount in corporate taxes.

In the most recent quarter, AOL’s revenue dropped 23% to $664.3m, while advertising revenue fell by 19%. –

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