1. threeW.net PLC
Smith Directories Acquired for £11.1m
threeW.net PLC
26 November 1999
threeW.net makes first internet acquisition
Smith Directories acquired for £11.1 million
ThreeW.net, which was launched in October 1999 to invest in internet
companies is pleased to announce today that it has conditionally agreed to
acquire Smith Directories Limited ('Smith Directories'). Smith Directories
is a private company which provides access through the internet to a wide
range of on-line business-to-business directories of suppliers of goods and
services combined with a facility for users to conduct business on the net.
The price being paid is £11.1 million, made up of £600,000 in cash with the
balance in threeW.net shares valued at 125p. To fund the cash element of
the consideration and to provide working capital for the enlarged group,
threeW.net is raising £1.6 million (net of expenses) via a placing and open
offer of 1,609,375 new shares at 125p. The shares to be issued to the
principal vendors are subject to certain dealing restrictions over the next
two years.
The Placing and Open Offer are underwritten by Insinger Townsley, the
Company's nominated broker. The new ordinary shares which are subject to
the Placing and Open Offer have been conditionally placed with
institutional and other investors, subject to the right of qualifying
shareholders to apply for their respective entitlements pursuant to the
Open Offer on the basis of 5 new ordinary shares at a price of 125p for
every 16 existing ordinary shares held.
Trading in threeW.net shares which was suspended on 15 November 1999, will
resume today at 10.15 a.m.
The acquisition is a reverse takeover under the AIM Rules and is therefore
subject to approval by threeW.net shareholders, who will vote at an
extraordinary general meeting on December 22 1999. The acquisition is
expected to be completed and the new shares will be admitted to AIM on
January 10, 2000.
Expected Timetable
Record Date for the Open Offer 19 November 1999
Publication of Prospectus 26 November 1999
Latest time and date for the splitting of application forms 3pm on 17
December
1999
Latest time and date for receipt of forms of proxy for the EGM 10am on 20
December 1999
Latest time and date for acceptance and payment in full 3pm on 21 December
1999

2. Extraordinary General Meeting 10 am on 22 December 1999
Completion of the Acquisition and Admission 10 January 2000
Dealings commence on AIM 10 January 2000
Application forms are personal to shareholders and may not be assigned,
transferred or split (except to satisfy bona fide market claims pursuant to
the Rules of the London Stock Exchange).
A document setting out the terms of the acquisition and the notice of
Extraordinary General Meeting is being posted to shareholders today.
Copies of the document will be available from the Company's registered
office, Verulam Gardens, 70 Gray's Inn Road, London, WC1X 8NF.
Smith Directories, based in Dudley, West Midlands, was founded by Jason
Smith in June 1998 and, following a period of research, development and
collation of databases, started trading in May this year. Mr Smith, will
become chief executive of threeW.net. Conditional upon Admission, Mr Smith
has entered into a service contract with the company for an initial salary
of £100,000, for a minimum period of two years. Mr Smith is restricted
from being involved in other competing businesses both during the period of
his employment by the Company and for a period of 12 months thereafter.
It is also proposed that Edward Sherman, who has extensive experience in
the information technology sector, will be appointed to the board as a non-
executive director. Conditional upon Admission, Mr Sherman has entered
into a letter of appointment with the Company for a period of one year from
admission for an annual fee of £12,000.
The building blocks of the Smith Directories business are trade and
professional directories, allied to a bespoke software system which allows
users to cross-reference companies and products and services and also to do
business. It already has 51directories accessible on the internet. Each
directory covers a specific market sector or profession making it quick and
easy for a prospective customer to identify and transact business with a
suitable supplier. The intention is to expand the directories to over
100 sectors.
Revenue is generated by advertising. Basic entries are free, but charges
are be made for enhancements such as additional product descriptions,
logos, product photographs and links to the supplier's own web site.
Further revenue generating opportunities include banner advertisements seen
by all those who log on to a directory and designing and hosting web sites
for those who require them.
ThreeW.net has not traded since its incorporation on 18 August 1999. In
the six months since it started trading in May this year, the Smith
Directories has generated over 900 subscribers with an average spend of
£300 per subscriber. Based on typical enhancement rates of certain leading
printed directories, the company estimates that the number of subscribers
has the potential to reach 70,000 by 2002 in the UK alone. In the four
months to August 31, 1999, Smith Directories made a loss before tax of
£22,000 on a turnover of £105,000 and had net liabilities at that date of
£22,000.
Despite the very large number of directories and search engines already
available on the internet, Smith Directories believes that it has
distinctive capabilities which give it a competitive advantage. In
addition to providing fast, easy access to product and service suppliers,

3. it can supply sales leads at electronic speeds and simplify and accelerate
the procurement process for directory users.
Jason Smith (30), who comes from a background of business development in
trade and professional magazine publishing, said:
'Business to business directories are a subject crying out for enhancement
on the web. We know directories work. They are an established,
successful form of publishing. Many have already been transferred to the
web, but simply as reference lists. In that respect, directories on line
are not new. What we have achieved, and what we believe is unique, is to
create a comprehensive system for companies to do business on the net using
directories as the mechanism. We have also enhanced the directories
themselves by interlinking information in a way which is far more relevant
to a businessman or industrial sourcing manager and making the directory a
combination of directory and trade magazine, cross referencing company
names from many trades and professions with latest information on products
and services. Smith Directories will be offering access through one portal
to the equivalent of 100 directories covering most of British industry and
commerce with the significant addition of a system through which they can
actually do business on the net. This completely changes the dynamics of
the business of directories and its profit potential.'
John Vergopoulos, founder and now vice chairman of threeW.net, said:
'The acquisition of Smith Directories represents a strategic decision to
place threeW.net firmly in the business to business sector of internet
activity where all the predictions are that growth and profitability will
escalate dramatically in the future. We are also looking at a number of
interesting opportunities to increase further our involvement in this
sector'.
Background: Business to business advertising
There are already well established markets in the UK and other western
countries for business to business promotion, including magazines,
directories, exhibitions and direct mail. Advertising Association research
figures indicate that in the UK approximately £900 million is spent on
advertising in business magazines alone and approximately £640 million on
directories. Morgan Stanley Dean Witter estimates that in Europe internet
advertising will represent five per cent of total advertising , or £6
billion, by 2005. Business to business e-commerce in the US is currently
five times greater in financial terms than business to consumer e-commerce
and is forecast to be twelve times greater by 2003. In view of this, the
directors of Smith Directories believe the usage of its services by
businesses is likely to grow rapidly and that it can take the lead in the
UK and subsequently in continental Europe in exploiting the advantages of
the internet in building on and enhancing the well-proven model of business
to business promotion already operated by the print media.
CONTACTS
John Vergopoulos, threeW.net plc 0181 564 8175
Jason Smith, Smith Directories Limited 01384 357150
John Goold, Shandwick International 0171 329 0096