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Groupon rejects $6 billion offer from Google

Groupon, the two-year-old online coupon company, unexpectedly turned down a reported $6 billion offer from Internet giant Google on Friday, according to reports.
Image: Google Considering Purchase Of Groupon According To Reports
Internet giant Google has been in talks to buy the upstart company for a reported $6 billion.Scott Olson / Getty Images
/ Source: msnbc.com staff and news service reports

Groupon Inc., the two-year-old online coupon company, unexpectedly turned down a reported $6 billion offer from Internet giant Google Inc. on Friday, according to multiple reports.

The Chicago-based Groupon will remain privately held and may pursue an initial public offering in 2011, according to the Chicago Tribune.

A report from the digital news website allthingsd.com quoted a source close to the situation as saying the deal was "as over as these things get."

Google, looking to expand into local search advertising, has been wooing the upstart company for months and a deal seemed to be near. But Groupon weighed its options and rejected the $6 billion offer, according to the Tribune, which quoted two sources with direct knowledge of the situation.

Google, with headquarters in Mountain View, Calif., was expecting to use the purchase to benefit from surging demand for coupons, sent via the Web, that offer discounts on everything from dinner cruises to dental exams.

Following the reported end to the talks, it wasn't clear the true intentions of the Groupon board of directors — whether they were using this end in talks as a negotiating ploy or a genuine desire to stay independent. One source told Bloomberg News that talks could resume if both parties overcome their unspecified differences.

Google, which boasts $33.4 billion in cash and marketable securities, initially offered between $3.5 billion and $4 billion to buy Groupon, one of the people familiar with the negotiations told the Tribune. Several reports now put the potential deal at $6 billion.

People familiar with the negotiations told Bloomberg that Groupon executives would be required to assist Google in the lucrative local-ad business as part of the combination of companies.

Groupon, which was also contemplating raising new venture funding, held out, eliciting a sweetened offer from Google, several reports said. Company chief executive Andew Mason has reportedly expressed interest in taking the company public next year.

Representatives for both companies late Friday said they would not comment on the reports.

A $6 billion deal would be the largest in Google's history, far exceeding the $3.1 billion acquisition of online-advertising business DoubleClick in 2007.

Google has been reluctant to use its cash pile, one of the largest among technology providers, to issue a dividend or buy back shares. That has prompted analysts and investors to urge the company to make larger acquisitions.

The internet powerhouse, however, apparently opened its check book this week to purchase real estate in New York City. Reuters, quoting a person close to the transaction, said late Friday that Google agreed to scoop up a large Manhattan office building the company occupies for $1.8 billion.

Groupon, founded two years ago, sends daily messages to users in 300 markets, offering discounts on products and services. Groupon keeps a 50 percent cut of every deal sold, while businesses benefit from a rise in new customers. Deals, known as groupons, activate when a certain number is sold, encouraging users to recommend offers to friends.

Since May, Groupon has doubled the number of markets it serves. Sales may top $500 million this year, two people familiar with the matter have said. Groupon would reach that milestone faster than Google and Amazon.com Inc. did.

Groupon had a valuation of about $1.3 billion in April, after Digital Sky Technologies led a group that invested in the company. It has raised $170 million from investors, including Facebook backer Accel Partners and New Enterprise Associates.

Groupon has a reported 3,000 employees. It has been hiring about 150 people a month, mostly in sales, to enlist the local businesses that provide its more than 400 daily deals, President Rob Solomon said in an interview this month.

Groupon's global network has more than 33 million subscribers in 35 countries.