Comparison Web sites pique interest at peak values

By Jeffrey Goldfarb

LONDON (Reuters) - A glut of price comparison Web sites are up for sale at values cementing the industry's coming of age, but which also belie some defensiveness and signs that owners are cashing out at what may be peak valuations.

Moneysupermarket.com is headed for a 1 billion pound ($2.02 billion) public flotation at the end of July while UK motor insurer Admiral Group Plc only recently ended talks with suitors for its insurance premium comparison site Confused.com.

Cheapflights, which compares travel deals online, also hired a bank in May to explore a possible stake sale or IPO, while private equity firm Providence Equity Partners reportedly bought a majority stake in comparison site NexTag for $830 million.

"Some of it is obviously a herd mentality," said one banker familiar with the sector. "There's still a lot of growth, but more of them have also reached a certain size or scale where an IPO can be looked at or bigger companies will now take notice."

Moneysupermarket.com founder Simon Nixon, who is selling at least 18 percent of his stake in the company, said the IPO is designed to raise the company's profile and help it pursue acquisitions.

"We believe the strength of our brand and market position, combined with our consumer focus and record of innovation, mean we are well positioned to capitalize on the positive trends we see in our chosen markets," Nixon said.

The company's valuation following Wednesday's pricing is at more than 30 times 2006 cash flow, about the same multiple that U.S. media group EW Scripps paid when it bought Britain's uSwitch for $366 million in March 2006.

"Either rationally or irrationally, most buyers have a hard time understanding hypergrowth businesses, as do public company investors," said Eric Lawson-Smith, a managing director at LongAcre Partners, which is advising Cheapflights.

"It's just a fear factor -- the fear of looking stupid."

YAHOO DEAL

Other deals in the sector have included Yahoo buying Kelkoo SA for 475 million euros ($653.4 million) in March 2004, eBay taking over Shopping.com for $620 million in June 2005 and Experian acquiring Pricegrabber.com for $485 million in December 2005.

The Money Supermarket site dominates UK financial price comparison with a 46 percent market share, according to research firm Hitwise. Money Saving Expert has 19 percent and Confused.com 15 percent.

Still, subprime mortgage referrals, which generate among the highest commissions, are on the wane and the craze of switching utility providers has cooled off. Credit card and insurance rate comparisons remain healthy, but bring in less revenue.

As the amount of choices grows for consumers, comparison sites still offer a way to cut through the clutter, especially as broadband penetration increases. Online commerce is expected to continue growing at about 20 to 30 percent across Europe.

But there are also growing fears that comparison sites from Tesco and Royal Bank of Scotland are poised to shake things up. The co-founder of Confused.com also left to start up rival Gocompare.com, which has been marketing aggressively on TV and elsewhere.