TheDeal: Bebo Founders Reclaim Company

NEW YORK (TheStreet) -- The founders of social networking site Bebo.com Inc. have won an auction of the company with a bid of more than 10 times what they offered to be the stalking horse. Still, the winning offer represents roughly one-tenth the price at which the debtor last changed hands in 2010.

Michael and Xochi Birch, the husband and wife founders and minority shareholders of Bebo, won a Monday auction of Bebo.com through vehicle MXB Holdings Inc. with a bid of just over $1 million, according to a source with knowledge of the case.

Judge Ernest M. Robles of the U.S. Bankruptcy Court for the Central District of California in Los Angeles approved the sale just after the auction, the source said. No order had been signed as of midday Tuesday.

The sale is expected to close next week, the source said.

MXB was the stalking-horse bidder for the auction, which had two separate lots: business assets and legal claims. MXB's lead bid included $50,000 for each lot, for a total bid of $100,000.

Bebo's business assets include all property, accounts, patents, trademarks, copyrights and other assets, while legal claims include Bebo's rights in any claims against any of the defendants in a shareholder lawsuit.

The source said no rival bids were received for the legal claims, but two other entities bid on the business assets, leading MXB to increase its bid to slightly more than $1 million.

Under the bidding procedures, approved June 6, rival bids of at least $50,000 per lot were due June 27. During the auction, bids had to increase in increments of at least $10,000.

MXB would not have received a breakup fee or expense reimbursement if it had lost at auction.

Just after the auction, Michael Birch tweeted: "We just bought Bebo back for $1m. Can we actually re-invent it? Who knows, but it will be fun trying."

Birch's other enterprises include Internet project incubator Monkey Inferno Inc. and The Battery, a private club in San Francisco.

Created in 2005, Bebo.com was purchased by AOL Inc. for $850 million in 2008, when it was the third-largest social networking site in the U.S., according to a May 14 declaration by receiver Michael Ong of Burke Capital Corp. AOL sold the company to private equity firm Criterion Capital Partners LLC for about $10 million in June 2010. Court papers said the company's value dropped, in part, because AOL did not continue to invest in it so that it would remain competitive with Facebook Inc.