Ihug risks landing in 'too hard' basket

By Aimee McClinchy

Thursday 20th April 2000

If Ihug's directors do not work out a deal with Force Corporation their fate may be sealed as "damaged goods" with other investors scared off, industry and analysts say.

If Ihug founders Tim and Nick Wood stick to their stated position not to wait for Force shareholders' May 15 adjournment, their twice-aborted effort to merge with a listed player may characterise the company as a too-hard partner, some sources believe.

Speculation the brothers are considering suing Force for not trying hard enough to convince shareholders to vote would only add to this image, they say.

Nick Wood maintains his company has been speaking to three or four investors, with one key investor ambivalent about whether the deal - for Force to issue 210 million shares at 57c a share for 100% of Ihug - went ahead.

After Monday's extraordinary meeting where Force shareholders put off a decision to buy Ihug because of market turmoil and falling share prices, a peeved Mr Wood said he thought being rid of a Force acquisition of Ihug, then valued at $120 million, may actually clear the way for the other investors.

He would not comment on what the companies were, other than to say they were technology-based. "Force is the loser, not Ihug," Mr Wood boasted.

But industry sources and analysts this week said having potential partners lined up was unlikely. "Who would go with Ihug now?" one technology source asked.

DF Mainland research head Bruce McKay said, "They've basically almost been spurned twice and that might make it difficult for them to do something with others.

"They may be in a position to have to go with Force. The point of going with Force was to have access to capital, experienced management and directors - going by themselves changes the equation a little bit.

"If they've been bumped twice - if you like they are damaged goods - nobody will go along and do a deal with them. Their best option is to get on with [Force]. Easter may be a good break to think about it."

Last year a deal for Sky to take 30% in Ihug broke down at the last minute, mostly because Sky management decided the two companies had different strategic directions - but also because of personality clashes.

Nick Wood has often been profiled as a feisty, quick-thinking, stubborn but innovative entrepreneur with an "I know best about the internet" attitude and a desire to have control over any business deal.

Force company secretary Peter Holdaway said the company was still keen on the merger, calling it "a good company, with good people and good prospects."

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