Bob Geldof is selling his online travel business Deckchair.com to rival World Travel Holdings.

The deal could never have happened in a bull market Bob Geldof

The former pop star has agreed to an initial payment of �3.2m in shares for his brainchild, following the demise of the internet sector.

The consolidation is aimed at cutting costs, given the battle for survival facing many internet firms at the moment.

"This deal could never have happened in a bull market, but in a collapsing market, whole new opportunities present themselves for small, lean and nimble operators like us," admitted Mr Geldof.

Performance-related pay

A payment of a further �6m is dependent on the trading performance of Deckchair and the enlarged group's consumer businesses over a three year period.

This will also be payable in World Travel shares at the then market price, somewhat of a gamble for Mr Geldof given the sharp swing downwards in internet shares over the last year.

World Travel Holdings floated on London's Alternative Investment market (AIM) in September last year, but its stock has tumbled from more than 110p at its flotation in September to 15p earlier this month.

But Mr Geldof remains confident in the successful future of buying cheap airfares and booking holidays through the web.

He is thought to have made between �6-7m from his previous business venture, Planet 24, which was sold to Carlton Communications.

It was this money that was invested to launch deckchair.com, but any return on this latest venture looks less likely.

Competing for clients

The European online travel market is expected to grow from �2bn last year to nearly �8bn next year.

But competition is stiff, especially from Microsoft's rival site Expedia and other established travel agents own websites like Thomas Cook.

Deckchair.com was set up two years ago and has more than 250,000 customers, helped by its celebrity backing.

But its new partner, World Travel Holdings, is thought to have struggled to build a strong customer base, despite strong technology and a base of call centres.

Celebrity status

The former Boomtown Rats singer will now ensure a higher profile for World Travel Holdings, and be paid �100,000 a year to promote the merged firm.

The ex-pop star, television executive and Live Aid organiser launched his new career as a travel agent in April 1999.

The idea was born from his frustration at being unable to find cheap airline tickets at the right time.

Deckchair.com boasts being able to scan 5 million possible flights in just 45 seconds, in order to find the cheapest.

Shares in World Travel Holdings rose 2.7% in Monday trading to stand at 19p, valuing the dot.com at �17.55m.