The BBC yesterday opened the way to a flotation of its commercial internet business after selling a 13.5% stake in the operation to a US venture capital firm for £32.5m.
The deals gives the business, comprising Beeb.com and internet service provider Freebeeb.net, a valuation of £240m. That is far lower than some previous estimates and reflects the change in sentiment about internet companies.
Rupert Gavin, chief executive of BBC Worldwide, the commercial arm of the corporation, said the deal would provide the business with funds to expand while allowing the BBC to retain control. The US firm, TH Lee Global Internet Managers, will have two places on the board of the subsidiary, to be renamed Beeb Ventures.
Investors were invited to come forward last year but Mr Gavin shrugged off the suggestion that the BBC could have achieved a better price had it clinched a deal before the reversal of internet fortunes in March. Cable company NTL and broadcaster Flextech also held talks with the BBC.
"In an uncertain market this is a very good valuation," he said. "It is important that we are retaining the majority of the economic interest."
Mr Gavin said all options would be considered when TH Lee looks to recoup its investment. The typical route for a venture capital firm is a stock market flotation within three to five years of an investment, a move that would need approval from the BBC's board of governors and the government. A flotation would draw claims of creeping privatisation.
Beeb.com made revenues of £2m last year, largely on the back of advertising. It has been putting a series of e-commerce partners in place which will be linked to programme websites. Users are, for instance, offered a CD shopping guide by clicking through to Beeb.com from a Top of the Pops site.
Mr Gavin said there would be clear markers to make users realise they were leaving a public service site and entering a commercial one.
Sharon Pipe, managing director of TH Lee, which has more than $1bn under management, said: "There are few game-changing investment opportunities where you are getting involved with a company which will be the leader in its field. Beeb.com is probably one of them."
The deal does not affect the corporation's public service internet operation which includes the award winning News Online and the recently launched Sport Online which are both licence fee-funded.
One of the first signs of the new funding will be a £7m advertising campaign for the online ventures from September.
