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Liberty Surf Buys X-Stream for $68 Million

France's Liberty Surf Group S.A.'s $68.3 million acquisition of Britain's The X-Stream Network Inc. Thursday consolidates two of Europe's more prominent free ISPs, just as the notion begins to take off across the Atlantic.

Liberty Surf will offer shareholders $1.26 for each X-Stream share, which values X-Stream at $75.3 million. Liberty Surf will buy all of X-Stream's outstanding shares, and X-Stream become a subsidiary of Liberty Surf.

The French ISP will inherit X-Streams newly opened operations in Norway, Denmark, Sweden and the Netherlands. X-Stream was said to be interested in expanding to Germany, Spain and Italy as well.

X-Sream claims to be the U.K.'s first free ISP, though its was soon overshadowed by dominant free ISP competitor FreeServe (FREE). Liberty Surf previously held a 10 percent stake in X-Stream.

Liberty Surf was founded in April 1999 by a group of shareholders including European retailer Kingfisher plc and Net startup incubator Europ@web, the Internet arm of the Arnault Group. The week of Liberty Surf's launch witnessed the debut of five other free ISP businesses in France. The service now lists 610,000 subscribers and 813,000 opened mailboxes.

The free ISP movement boomed throughout Europe last year, spurred by a telecom structure which separates phone fees and access fees, and is starting to enjoy widespread popularity in the U.S. AltaVista, Excite@Home, (ATHM) and Bluelight partners Yahoo! (YHOO) and Kmart have all launched a free Net access component to the respective portal strategies. Lycos (LCOS) and NBCi following the free ISP launch trail this week.

While NetZero (NZRO) and FreeiNet remain the more popular State-side free ISP choices, companies as far ranging as the Manchester United football league have opened free service packages in the U.K. The popularity of free ISPs even spurred a resistent America Online Inc. (AOL) to launch a free service in the U.K. last year.

Kingfisher shares were up this week on favorable forecasts for Liberty Surf's upcoming IPO on the Paris exchange, in which the ISP is expected to raise as much as 518 million euros ($503.9 million), according to Reuters reports.



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