In a major setback for OzEmail-hungry Eisa, Fairfax's online arm, f2, has ended its memorandum of understanding with the ISP, citing poor market conditions as the driving force behind the decision.
In April, f2 announced it would manage and provide content for the portal of the combined Eisa/OzEmail business.
However, Eisa's proposed $300 million-350 million deal to acquire OzEmail has been hampered due to the so-called market correction in mid-April, which saw internet stocks, including Eisa shares, drop dramatically.
Under the original deal, f2 was to pay $40 million to acquire a 5 per cent equity stake in Eisa at $2 per share. Since Black Monday (April 17), Eisa shares have dropped continually, recording an all-time low yesterday of 51 cents. Prior to the stock market crash, Eisa shares were trading as high as $3.18, before plunging to 93 cents on the morning of April 17.
Nigel Dews, chief executive of f2, admitted the market downturn had contributed to f2's decision to pull out of the deal, despite efforts to agree on new terms.
"We were unable to come to an arrangement on the deal in terms of what will work for shareholders," he said.
Dews, however, did not rule out the possibility of renegotiating a deal at some later stage should OzEmail be acquired by another player or should the market improve.
"OzEmail remains an attractive asset, so who knows? Our doors are always open for deals," he said.
According to Dews, f2 will continue to develop distribution deals through a number of different channels. "We will continue to work towards other options . . . portals are one of many options. This was one possible route," he said.
Eisa did not return calls before press time.