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BT, VerticalNet and Internet Capital Group Tuesday inked a $227 million deal for the alliance to develop a business-to-business trading community for the European market.

The VerticalNet Europe venture, in which VerticalNet will be the majority shareholder in the joint venture, will be backed by a cash component of $107 million and another $120 million in assets. The group is calling the investment the largest ever for an Internet-based business-to-business company.

One of the first steps in forming the new European venture is the creation of VerticalNet UK Ltd., which will be co-branded by BT and VerticalNet. It will run a group of vertical Web sites where businesses can exchange information and ideas, and market their products and services.

"With VerticalNet Europe we are entering into the Internet's next hypergrowth market," said VerticalNet President and Chief Executive Officer Mark Walsh.

Walsh said that partnering with BT and Internet Capital would allow rapid exploitation of the market, a point confirmed by the immediate launch of the UK community.

VerticalNet currently owns and operates 55 industry-specific Web sites which it calls "vertical trade communities." They range from Plant Automation.com, to Photonics Online, PublicWorks.com, and Solid Waste.com.

The acting CEO of VerticalNet Europe will be Mario Shaffer, who up till now has been VerticalNet's vice president of business development and international operations.

"We are actively seeking employees, partners, and acquisitions for the joint venture to enable us to expand quickly," said Shaffer.

Speaking on hehalf of BT, Ben Andradi, managing director of BT Internet and e-usiness, said that the formation of VerticalNet Europe would enable thousands of businesses throughout Europe to reap immediate e-business benefits.

"The sheer variety of information, communication and trading opportunities will make the concept of trading communities virtually impossible to ignore," said Andradi.

According to BT, experts predict that the global business-to-business e-commerce market will be worth $1.3 trillion by 2002. Even to BT, currently capitalized at £80 billion ($130 billion), that is a prize worth pursuing.