Business Essentials for Professionals


Talks to Buy Host Europe Initiated by GoDaddy: Reuters

Talks to Buy Host Europe Initiated by GoDaddy: Reuters
As the U.S. website domain name provider GoDaddy attempts to expand and seek new ways to generate higher-margin businesses beyond the initial set-up of websites, it intends to buy peer Host Europe Group (HEG) and the media reported, quoting people who had knowledge about the matter, that it is in exclusive talks with the prospective buyer.
Arizona-based GoDaddy is now venturing into hosting websites itself for small businesses and consumers after achieving the status of being the world's largest website address registrar.
The outrageous TV marketing campaigns with celebrities or during the Super Bowl and other sporting events that were sometimes aired in the US market made this company, founded in 1997, well-known in the country.
Apart from shifting into the more profitable web hosting business, GoDaddy also intends to broaden its customer base in Europe by the purchase of HEG which help the company in both of these objectives.
Media reported quoting people with knowledge about the matter that HEG could be valued at about 1.7 billion euros ($1.8 billion), or over 12 times its forecast 2016 core earnings of 140 million euros and the company serves mainly small and medium-sized businesses and is one of Europe's largest independent web hosting firms.
114 million euros for like-for-like adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) on sales of 280 million was posted by HEG in 2015.
To help customers run businesses on the sites set up through GoDaddy, the company has the potential to generate $325 million from selling applications, nearly $1 billion in revenue from domains and $750 million from hosting in 2017, according to an estimate made by Deutsche Bank.
Sources said that a third bid by buyout firm Centerbridge was bagged by the company after trumping rival bids from German Internet service provider United Internet, which had teamed up with private equity firm Warburg Pincus [WP.UL]. for this bid, GoDaddy had been backed by private equity firms KKR and Silver Lake.
Permira, which teamed with Interoute, part-owned by investor Aleph Capital and Deutsche Telekom withdrew from the bidding process this month.
There were no comments available from Cinven, GoDaddy and KKR. Silver Lake and HEG were not immediately available to comment.
Cinven expanded the business with acquisitions after having bought HEG in 2013 for 438 million pounds.
The sources said that the potential deal could be to te tune of around 1.5 billion euros, or 4.5 times combined EBITDA and banks such as Barclays, Citigroup, Deutsche Bank, Morgan Stanley and RBC are includedin the list of backers for the deal and are lining up debt financing for the same.
The financing of the deal can be launched as early as before the end of the year in case a deal is struck. Europe’s very liquid leveraged loan market has been eager for new paper and event-driven deals as demand has far outweighed supply so far this year and therefore a financing of this size would be welcomed by the market.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc