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Groupon reportedly rejects Google's acquisition offer

The Internet giant had reportedly offered $5 billion to $6 billion for the group-buying start-up, which offers major discounts on local services.

December 04, 2010|By Melissa Harris and Wailin Wong

Reporting from Chicago — Maybe a coupon would have helped. Chicago-based Groupon Inc. has turned down an acquisition offer from Google Inc. and is staying independent, according to two sources with direct knowledge of the situation.

The two companies had been engaged in talks, with speculation about the corporate marriage reaching a fever pitch over the last week. Google had reportedly offered between $5 billion and $6 billion for the group-buying start-up, which offers major discount coupons for local services.

Groupon, which has had a steep growth curve since being founded two years ago, may still choose to pursue an initial public offering but will not make a decision about going public until 2011, a source said.

A Google spokesman declined to comment. A Groupon spokeswoman could not be reached for comment.

The company has gone from side project of another website to a tech star with more than 3,000 employees worldwide, a presence in 35 countries and expected annual revenue of $500 million this year. Groupon was reportedly profitable in its seventh month.

Groupon's financial backers include Chicago-area investors Eric Lefkofsky and Brad Keywell, venture capital firms such as New Enterprise Associates and Accel Partners, and Russian firm Mail.ru Group, formerly known as Digital Sky Technologies.

The interest in Groupon, which was also reportedly courted by companies such as Yahoo Inc., underscores the start-up's meteoric growth — its valuation was $1.3 billion in April — and the industry's belief that the company's business model is a sustainable one.

Groupon takes a cut, typically 50%, of the revenue from each of its daily deals. Its Web-based service offers consumers steep discounts on local businesses, but only if enough people sign up for the offer.

Even amid the rumors of the last several weeks, Groupon continued to sign partnership agreements and make acquisitions. The company agreed to have its deals featured on EBay and joined a new Yahoo program that aggregates daily deals from multiple providers, including many of Groupon's rivals. And this week, Groupon acquired a trio of Asian daily-deal sites and bought a California-based technology firm, expanding its presence in Silicon Valley.

Groupon said it also plans to expand its product team in Chicago. Earlier this year, the company received a $3.5-million incentive package from the state of Illinois to create 250 additional jobs.

mmharris@tribune.com

wawong@tribune.com

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