Is French group becoming the next CMGI?
A company whose holdings include Vuitton handbags and Moet champagne is building an arsenal of online investments that could make it a major international player.
Group Arnault, a private holding company owned by French entrepreneur Bernard Arnault, is apparently following a path pioneered by U.S. venture firm CMGI. That company created a name for itself by investing in an array of Internet ventures, from start-ups to established firms such as AltaVista.
Group Arnault owns a 49 percent stake in LVMH, a luxury goods company whose brand portfolio includes the likes of Vuitton, Givenchy, Dior, Moet, and Krug, according to J.B. Tellio, who heads the Internet group for Group Arnault-LVMH. Bernard Arnault is the chairman of LVMH, whose latest venture is Sephora.com, a beauty products site scheduled to be launched in September.
As reported, the company recently formed Europ@web, which, beginning with 500 million euros ($509.5 million), "will make investments in European Internet companies and the European subsidiaries of U.S. Internet companies and facilitate their working together where synergies or other benefits can be achieved," Group Arnault said in a statement.
Analysts say French company's timing is right.
"Online commerce in Europe is in its infancy, but there is a battle coming for the hearts and minds of consumers online," Jupiter Communications analysts wrote in a report. "The next one to two years will be the crucial phase for the establishment of an online brand in Europe. The U.S. experience demonstrates that the compound annual growth rate of the market is at its peak during this phase."
Recent changes in the cost of Internet access may also make this an attractive time to enter the market. "Europe is really ripe, especially with the advent of the 'free' ISPs," Michael Dodd, a partner in LVMH Technologies, which is a funding vehicle for Group Arnault, told CNET News.com today.
Adoption of the Net by consumers has been relatively slow in Europe, a pace that has often been blamed on the per-minute phone call charges Europeans must pay to use the Net. U.K. electronics firm Dixons Group launched Internet service Freeserve in September 1998, which doesn't charge a subscription fee but gets a cut from the call charges. This and similar moves by others have been credited with the recent boom in Internet adoption in Europe.
So far Group Arnault's focus has been on business-to-consumer companies such as Webvan, Datek, Planet RX, 1-800 Flowers, and Eloan in the United States and Boo.com, Icollector, and ISP Liberty Surf in Europe, Dodd said. He noted that, in spite of the company's focus on that area so far, future investments are likely to include other types of interests such as community and content sites, as long as they are "portable to Europe." He declined to name the firms that are being considered.
This week, Group Arnault added two more to its list, buying nearly 27 percent of the shares MP3.com will offer in its impending stock offering and, along with PetCo, taking part in a $66 million investment round in Petopia.com. In addition, Ashford.com, an online luxury goods company in which Group Arnault has a stake, this week filed for an initial public offering.
For the moment, Dodd stressed that the funds for the investments are coming from privately held Group Arnault and not the public LVMH--though he added that an initial public offering of shares in Europ@web is likely at some point.
"We expect to be the dominant European player in the Internet field like Softbank or CMGI," Tellio wrote in an email to CNET News.com.
Internet venture fund CMGI, which last month acquired a controlling stake in AltaVista for $2.3 billion, has been making headlines since it opposed the ill-fated acquisition of Lycos by USA Networks in February.
Group Arnault and CMGI share more than a common goal: some of their investments overlap. Both companies hold interests in MotherNature.com and Furniture.com.