FlyingPig grounds transtasman merger proposal

By KARYN SCHERER

Continuing uncertainty about the future of internet-based retailing claimed another victim yesterday, with online department store FlyingPig abandoning plans to expand across the Tasman.

The company, which has a clutch of high-profile investors, including three firms with links to entrepreneur Eric Watson, has decided against a merger with Australian e-tailer TheSpot.

Both companies were reluctant to discuss details of the decision yesterday, saying only that the merger depended on "a number of conditions" that had not been met.

Both also blamed a reluctance by investors to support internet-based retailers.

FlyingPig executive chairman Stefan Preston conceded that the climate for investment in internet-related companies was "a lot more conservative" than it had been at the height of the tech-stock boom.

However, he did not rule out the merger going ahead later. He said FlyingPig did not intend to resume negotiations with another Australian e-tailer, Dstore, which plans to expand into New Zealand next month.

TheSpot chief executive Justin Punch, who would have overseen the merged firm, also said the two companies had decided it was better to concentrate on their respective businesses.

"There's a whole set of administrative and commercial terms that need to be settled on and we've not been able to complete all of those," he said.

The move follows the collapse of several prominent overseas e-commerce companies, such as Britain's Boo.com, an online clothing retailer.

The public float of local technology company EstarOnline was postponed in April amid uncertainty over the future of large global players such as CDNow, which helped spark the Nasdaq's April meltdown.

FlyingPig was thought to have been keen to announce the merger plan earlier this year, but it was not finally announced until last month.

It claimed at the time that it would create the largest online store in Australasia.

FlyingPig also played up TheSpot's links with American online juggernaut Amazon.com, hinting that the US company might eventually be interested in a partnership.

Mr Preston confirmed the decision meant FlyingPig would not be adding toys, babycare, health and beauty products to its site before the end of the year. The new products would have boosted an existing range that includes books, videos, software and stationery.

Mr Punch also confirmed that plans to launch a book site were now on hold.

Australian book chain Angus & Robertson had intended to take a stake in the merged company.

Angus & Robertson is owned by Blue Star, the same company that owns Whitcoulls in New Zealand. Both book chains are for sale.

Mr Preston, who is a former head of Whitcoulls, said he did not expect that the collapse of the merger would affect the sale process.