Last May, when Europ@web was preparing for the initial public offering that was to be pulled a few weeks later, LibertySurf was the star of its portfolio.

There were unrealised gains of close to €1 billion (£788 million) on the investment, even though the stock had roughly halved since the March flotation.

LibertySurf was also being paraded as a successful example of incubation - the idea for the free Internet service provider had been hatched in-house at Groupe Arnault (a few months before the creation of the Europ@web vehicle) in March 1999.

Now Bernard Arnault is selling out. "We have to take account of the new reality," Europ@web said. "There is consolidation in the sector and LibertySurf as the number two in France could not stay independent. We did not want to miss the right time."

Incubation is now firmly out of fashion, and the priorities of Europ@web, one of Europe's most prolific Internet investors in the 12 months to June 2000, are very different.

Its portfolio is heavily into ecommerce. So the Internet investment credentials of Mr Arnault who, before the creation of Europ@web in June 1999 also had exposure to the now collapsed Boo.com and Boxman, have taken something of a knock.

His deal-making skills look rather more intact. While LibertySurf has hardly lived up to its initial vast financial promise, Europ@web is reaping a fairly respectable €237 million (€71 million in cash and the rest in Tiscali shares) for its €55 million investment.

In December, Mr Arnault managed to extract €300 million from Suez Lyonnaise des Eaux for 30 per cent of the portfolio excluding LibertySurf and three of the group's other best-known investments.