RealTime IT News

On-Again/Off-Again Appear On-Again

Web retailer Kozmo.com, which promises urban deliveries in less than an hour, is apparently back in talks to buy rival Urbanfetch.com, according to a report in The New York Times Monday.

Kozmo tried acquiring the company, which has branches in New York and London, in August but those talks fell apart. The New York Times reported that executives close to the negotiations said the two companies agreed to a deal in principle last week. An announcement may come by the end of the week, though the executives noted that significant issues still need to be ironed out.

The two delivery services have been at each other's throats since 1999 when Kozmo sued Urbanfetch -- before it even started business -- contending that Ross Stevens, Urbanfetch's founder, stole Kozmo's business plan. Stevens was working for venture capital firm Integrity Capital Management when Joseph Park, Kozmo's founder, came to him for funding for the delivery business.

The case was settled out of court in September.

Both companies have struggled in the wake of the dot-com shakeout that hit the sector in spring. Kozmo has gone through several rounds of layoffs, at one point laying off 275 employees, about 10 percent of its staff. In August the company withdrew a $150 million IPO that had been filed in March, before the shakeout occurred. Urbanfetch has imposed a $10 minimum order, cut its marketing budget by 70 percent and stopped offering delivery of video rentals.

Executives of both companies spent three days in London last week, taking a hard look at the books on Urbanfetch's operation there. The London branch was started this year, and could serve as a beachhead for expansion into European and Asian markets. Kozmo operates in 11 cities across the U.S.: Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Portland, San Diego, San Francisco, Seattle and Washington, D.C.

The New York Times reported that company executives said if the deal does go through it will be an all-stock transaction. Kozmo would pay Urbanfetch in private equity.

Neither company is publicly traded. Kozmo has raised more than $250 million from an all-star lineup of investors, including Amazon.com, Chase Venture Capital Associates, Columbia TriStar, DreamWorks SKG, Flatiron Partners, Liberty Media, Oak Investment Partners, Softbank, Starbucks Coffee (to which it has committed to paying $150 million over the next five years for using its store fronts as drop-off points for movie rentals), 20th Century Fox, Universal Studios and Warner Bros.

According to its IPO filing, Kozmo burned $27.3 million by Dec. 31, 1999.

Kozmo's offices were closed for the Columbus Day holiday and the company could not be reached for comment.