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

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,

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