Bebo sold to investment bankers for a loss of $840M (ouch!)

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Bebo users can breathe a sigh of relief as the company which was at risk of being shut down due to low traffic, has been sold to investment firm, Criterion Capital Partners.

AOL Inc., the Internet company spun off from Time Warner Inc., sold its Bebo social-networking service to Criterion Capital Partners LLC for less than 2 percent of what it paid for the site two years ago, Bloomberg Business Week has reported.

AOL, which paid $850 million for the site, got less than $10 million for it, said a person familiar with the matter, who declined to be identified since the price wasnt made public. AOL said in a filing today it expects to record a tax benefit this quarter of $275 million to $325 million from the sale. (OUCH)

The New York-based Internet company said April 6 it was weighing a sale or shutdown of Bebo. AOL said it wasnt in a position to fund a turnaround at Bebo after losing ground to bigger social-networking rivals Facebook Inc. and News Corp.s MySpace. The price AOL paid for Bebo included $766 million of goodwill, according to regulatory filings.

Criterion Capital Partners are specialists in facilitating growth plans and turnarounds, AOL Chief Executive Officer Tim Armstrong said today in a memo to employees. For AOL, the transaction will also create a meaningful tax deduction.

Criterion, a Los Angeles-based merchant-banking and financial-advisory firm, said the deal was led by managing partner Adam Levin, along with strategist Paul Abramowitz and web entrepreneur Richard Hecker. Criterion wil take over Bebos global operations immediately and base the company out of San Francisco, according to a statement from the firm today.

Bebo is still the social networking site of choice for rangatahi Maori as it provides a means to self-identify with unique skins and themes, something with Facebook does not do (but which MySpace does).

While Facbook utilises comment threads (users can comment a particular status updates, links, etc. Bebo simply uses chronological threads which significantly limits the ability to communicate. No doubt Criterion will consider changing the way in which users participate if they are to increase their market share.

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