Egg, provider of online banking and financial services to almost 2 million customers in the UK, is to launch in France in 2002 with a target of acquiring 1 million customers in its first three years. Egg expects to invest 50 million in brand and marketing spend and 15 million in development costs over that period to support the launch. The French business is planned to break through into profit by the end of 2004.
Egg announces today that, subject to regulatory approval, it will be expanding its presence in France through the following initiatives:
Egg will acquire 100% per cent of Zebank for Euro 8 million (c. 5 million) in cash. Zebank’s net asset value as at 31 December 2001 was Euro 31 million (c. 19 million). The current shareholders (Groupe Arnault and Dexia) will be putting Euro 30 million (c. 18.5 million) of cash into the business during the period between signing and completion to ensure all share capital is fully paid up. Accordingly, Egg will also reimburse the shareholders for this injection of funds.
In addition to a significant B2C launch later this year, Egg will distribute its financial services products through Zebank’s distribution partners, which now include French retailers Sephora and La Samaritaine.
Egg will extend its recently announced partnership with Microsoft to offer further financial services products, including cards, in France in addition to the currently proposed fund supermarket through MSN, the leading consumer web destination in Europe.
France – an attractive growth market for Egg’s financial services products
France is a particularly attractive market for Egg’s products being the third largest financial services market in Europe. After the UK and US, it is the world’s biggest revolving card balance market.
According to recent research from Forrester, 22% of France’s Internet users bank online, which is expected to grow to 45% by 2005. In continental Europe, France has the second highest number of online bankers: 3.2 million. When Egg launched its Internet-only credit card in 1999, the UK Internet population totalled 18%. This has more than doubled in three years to 42%. Similarly, three years ago, 3% of the UK Internet population banked online and this figure is now 28%. (Source: MORI.)
Egg has a successful banking and financial services business that is ideally suited to exploiting these opportunities. It has quickly proven its expertise in the UK by offering best of breed products, in particular through its card business, using leading-edge technology and developing a distinctive and compelling brand proposition.
Accelerated market entry through acquisition of Zebank
The acquisition of Zebank will provide Egg with a platform to distribute Egg branded banking and financial services products in France. Zebank possesses the necessary call centre technology, people and systems infrastructure for Egg to accelerate its B2C entry to the French market and exploit the opportunities for growth. Egg will also acquire the 70,000 existing customers and 120,000 accounts of Zebank.
Zebank was the first digital online bank in France when it launched in February 2001, with its primary products being savings and current accounts. Egg will extend the financial services product range in line with its UK offering, aiming to bring the consumer better value for money and flexibility of use.
Today, Zebank customers are up-market and metropolitan; the majority are centred around Paris and managerial level earning higher than average salaries. They are comfortable with digital technology and 90% of them hold an online savings account. The base is predominantly male (70%), with the majority of customers between 25 and 45.
Zebank currently has approximately 300 employees, and Egg expects this number to increase over time in line with its expansion plans for new business lines.
The acquisition is conditional, primarily on regulatory clearances, and is expected to complete in the first half of 2002.
Egg intends to retain the existing Zebank senior management team, headed by Olivier de Montety. M. de Montety will remain Directeur Gnral, Zebank and will join Egg’s Executive Committee. M. de Montety has been head of Zebank since 1999. Prior to this he founded Fimatex, the online brokerage (1995). M. de Montety will report to senior Executive Committee member Richard Duvall, Egg’s Chief Sales and Distribution Officer who has executive accountability for the performance of Egg France. Richard, who reports to CEO Paul Gratton, has been with Egg for five years during which time he led the project team that created and launched Egg. He currently has responsibility for global sales and distribution through all Egg’s channels and partnerships. Prior to joining Egg he worked for Coopers & Lybrand and Glaxo Wellcome.
In addition to its B2C plans, Egg will use distribution deals with selected partners to accelerate customer acquisition and provide a physical manifestation of its brand. At launch these partners will include the Sephora chain and La Samaritaine department store. Sephora is one of the leading chains of perfume and cosmetics stores in France with 181 outlets and La Samaritaine is a leading Parisian department store.
Furthermore, on the back of this transaction, Dexia are now in discussions with Egg about the possibility of distributing Dexia funds through Egg’s leading mutual funds supermarket.
Microsoft partnership expanded
Egg will also distribute banking and financial services products, including card, through Microsoft’s MSN.fr, extending the range of products included in its recently announced partnership with Microsoft. This will provide Egg with additional low risk distribution. MSN is France’s second largest portal, and has some 7 million users in this market.
Profit, innovation and growth
Egg recently announced that it broke through into profit in November 2001, in accordance with its long-standing commitment. Its UK business is now sustainably profitable. The plans for Egg in France target breaking through into profit by the end of 2004. The total size of the profit and loss investment in the first three years in launching the business and acquiring the customer base is expected to be approximately 100 million, by which time Egg expects to have over 1 million customers in France. This includes a planned 50 million of brand and marketing spend and 15 million of development costs.
Egg has delivered strong growth in its UK business since its flotation. The moves announced today will allow it to apply its innovative approach to personal finance in a large, but developing digital financial services market, extending the Egg brand outside the UK and providing new avenues for customer growth.
Egg’s Chief Executive Paul Gratton commented:
“We are excited about the opportunities that these moves give us in France, building our international presence and broadening the Egg offer in line with our stated plans. Zebank’s existing capability, the new distribution agreements with retailers including Sephora and La Samaritaine, and the extension to our Microsoft alliance give us an important platform to exploit this attractive growth market.
“We have the proven expertise and innovative approach to digital financial services to take advantage of the explosive growth potential in France. This is an important step as we expand our operations and begin to establish Egg as an international brand.”