LaNetro Takes Control of MonsterMob
The Spanish mobile content group, LaNetro Zed is taking control of its UK rival, MonsterMob with an investment of £34 (US$66.5) million in the company. LaNetro Zed will end up with approximately 52.6% of the enlarged capital of the group. The move enables to LaNetro Zed to take control of the larger company, without the hassles of launching a formal takeover bid via the stock market, as had been widely expected.
LaNetro Zed said in a stockmarket filing that it no longer plans to launch a formal takeover for the company, unless a third party intervenes.
Commenting on the proposed transaction, Hans Snook, Chairman of MonsterMob said "The agreement with Zed secures the financial position of MonsterMob and brings significant strategic and operational benefits from an association with a partner which is a leader in mobile content and has matching and complementary product capability and global reach. It will give us the flexibility to take advantage of the growth opportunities within the fast moving industry in which we operate."
MonsterMob has been in trouble ever since an investment in China turned sour following changes to the regulatory environment. However, the changes were not unexpected and generally cleaned up an unregulated market which was awash with spam and unexpected subscription services that could not be easily cancelled.
Until these regulatory changes China was MonsterMob's largest territory by revenue and profit and hence the Company's overall profits and anticipated cashflows have been adversely affected. The company has now admitted that it has commitments to make cash payments during 2007 and 2008 to vendors of businesses which it has acquired, which as a result would be challenging to make from existing resources and projected operating cashflows in the absence of either new capital or suitable amendments to existing agreements.
Shortly after the Chinese investment, MonsterMob's founder and CEO Martin Higginson was sacked by the company. At the time, much was made of his desire to focus on the UK market, while the board wished to focus on overseas expansion. Quite what impact the Chinese disaster actually had on the decision to sack Higginson may need to be re-evaluated in the light of MonsterMob's comments about the precarious financial state the company found itself in.
Higginson still owns 16% of the shares of the company, although that will be halved following the LaNetro Zed investment.
Since the announcement of the interim results in September, MonsterMob says that overall trading has been broadly in line with expectations. MonsterMob's businesses in South-East Asia, Russia and the USA appear well placed as they go into 2007.
The UK market has remained very difficult with the business continuing to trade at a monthly loss, despite significant efforts to re-position it. The Board says that it is actively reviewing its options for the UK business, which does suggest a possible disposal or even closure. LaNetro Zed already operated within the UK market, and recently appointed a new managing director to the UK division, so the UK arm of MonsterMob would be an unnecessary distraction.
There company said that there continues to be considerable uncertainty as regards China, which has traded at substantially lower levels of overall profit since the changes in regulations in July 2006, although the company is hopeful that it has now seen the worst of the situation in China."
Posted to the site on 2nd January 2007
