Lastminute raises £74.6m through convertible bonds issue

Lastminute.com announced yesterday it had raised €103m (£74.6m) through a placing in convertible bonds which the online travel agent will use to continue its acquisition spree and develop products.

The rapidly expanding company said last month that it expects to post its first net profit by 2005. It has spent about £98m in the last two years on purchases, including the acquisition of the travel company Holiday Autos.

The bonds, which will mature in 2008, will convert into shares of Lastminute.com at 364.5p, 28 per cent more than Monday's closing price, the company said in a statement.

Convertible bonds have become a popular way for companies to raise cash in recent months. On Tuesday Hilton, the hotels and gaming group, said it had successfully sold a £300m convertible bond issue.

David Howell, finance director of Lastminute, said the company did not opt for an equity issue because they tend to be heavily discounted to companies' share prices. "This is at a premium and we believe the funds we are raising will be used in an earnings enhancing way," Mr Howell said. Lastminute's shares fell 7p to 286p yesterday.

Lastminute was co-founded by Martha Lane Fox. One of the most high-profile products of the dot.com boom and one of the few internet companies to have survived when the bubble in technology stocks burst, it plans to use the cash to fund acquisitions valued at between £5m and £7m. It has been widely rumoured to be interested in buying the Aim-listed Online Travel Corporation, though the company would probably cost slightly more than that price range.

The securities were placed privately with institutional investors. Merrill Lynch and Cazenove are managing the bond offering. The company will issue shares to bondholders if Lastminute's share price rises above the conversion price. If it does not, the company will repay the bondholders in cash.

Allan Leighton, chairman of Lastminute, said in the statement: "The issue of the convertible bond enhances our balance sheet and will give us the opportunity to pursue a number of small but strategic acquisitions where an element of cash may be important to the vendor."