Search marketing company LookSmart announced Wednesday that it and British telecom giant BT had agreed to end their 18-month-old joint venture, BT LookSmart, in the United Kingdom and Japan. LookSmart will take over the venture, merge its operations into its own and pay BT $5 million in cash and 1 million shares.
The agreement to dissolve the partnership comes as BT looks to rein in its ancillary operations from its Internet service provider division and LookSmart faces a looming payment on a loan from the venture.
“We’re pleased to announce this restructuring of LookSmart’s international operations,” said Jason Kellerman, LookSmart’s chief executive. “We continue to see valuable opportunities in the Japanese and UK markets.”
Under the terms of the deal, LookSmart will pay BT $3.5 million in cash, $1.5 million in restricted cash that BT put up for the joint venture, and 1 million common shares. At yesterday’s closing price, the shares would be worth $2.5 million. The companies will share equally in restructuring costs.
In February 2000, LookSmart and BT announced the equally funded joint venture to provide search services Europe and Asia. According to filings with the Securities and Exchange Commission (SEC), BT initially extended a $50 million loan to LookSmart for its half of the venture. In March 2001, when the credit facility was due, along with $19.5 million in interest, LookSmart renegotiated the loan and paid $35 million.
The restructured loan, worth $35 million, was due in March 2003. With BT divesting the majority of its Internet ventures, LookSmart negotiated the settlement to free itself from debt to BT, closing the venture and merging the operations with its own.
“This sensible resolution of the joint venture and related debt significantly strengthens LookSmart’s balance sheet,” said Dianne Dubois, LookSmart’s chief financial officer.
In its last filing with the SEC, LookSmart reported $67.8 million in liabilities and $50.5 million in cash.
