Egg hatches online takeover

EGG, the internet bank, has confirmed that it is in talks about buying Zebank, an online financial business. Egg is looking to fulfil its promise to expand in Europe by pursuing the deal with French businessman Bernard Arnault.

Egg, which is 80% owned by the Prudential, said that there was no certainty a deal would be struck with Groupe Arnault.

Arnault, chairman of the LVMH luxury goods group, had been looking to offload the operation since the dotcom bubble burst last year. Zebank has an estimated 100,000 accounts, while Egg has 2 million.

Egg said last month that it had recorded its first profit during November. The initial move into France will be taken this summer when it begins an alliance in Germany and France with Microsoft's MSN website.

Egg's discussions about acquiring a majority holding in Zebank involve Groupe Arnault, which owns an 80% stake, and the remaining stakeholder Franco-Belgian bank Dexia. It is believed that Groupe Arnault will look to retain a stake in the new company. Egg said that Zebank was seeking to secure distribution arrangements with French retailers - similar to Egg's credit card distribution arrangement with High Street giant Boots.

'Shareholders should note that the discussions have yet to be completed so there can be no certainty as to their outcome,' an Egg spokesperson said. Egg shares dropped 7p to 141p following the announcement.