GoDaddy to Acquire Host Europe Group in €1.69 Billion Deal

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Host Europe Group has been on the market for the last few months. The company, which is currently owned by private equity firm Cinven, was courting suitors with an expected price close to €2 billion. Over the last few weeks, however, it became apparent that the only serious suitor was GoDaddy.

This morning GoDaddy confirmed the purchase as well as revealing some details on how much the entire deal is worth.

So how much is it worth? In total it’s an impressive €1.69 billion (US$1.79 billion), which is broken down as €605 million paid to the shareholders with the remaining €1.08 billion in assumed net debt.

GoDaddy was acquired for over $2.2 billion back in 2011 by private equity firms KKR, Silver Lake Partners, and Technology Crossover Ventures.

So what is GoDaddy actually getting?

Host Europe Group (HEG) is one of the largest hosting and domain name companies in Europe, though most of its business is conducted via brand names such as 123 Reg, Host Europe, Domain Monster (Mesh Digital) , Domain Factory, Heart Internet, Plus Server and Paragon (and others).

They also own Web Hosting Days, which acquired NamesCon.

Some of the numbers from HEG:

  • 1300+ employees
  • 9 wholly owned data centres
  • 1.7 million+ customers
  • 7 million+ domains

With the acquisition of such a large player in the European market GoDaddy will have a very large share of the European market, though whether the numbers are high enough to attract any attention from competition authorities is doubtful.

UPDATE: The new consolidated company could end up with over 40% of the *.uk namespace. While Nominet’s voting rules places caps on larger members, a single group of companies would have a very high concentration of the namespace and could effectively control the market. (Hat tip to Andrew Bennett for pointing this out)

The new combined European company will be headed up by Patrick Pulvermüller, who is currently CEO of HEG.

 

Here’s the full release:

GoDaddy Inc. (NYSE: GDDY), the world’s largest cloud platform dedicated to small, independent ventures, today announced it has entered into a definitive agreement to acquire Host Europe Group (HEG) for €1.69 billion (US$1.79 billion), including €605 million paid to the selling shareholders and €1.08 billion in assumed net debt. The transaction has been approved by the GoDaddy board of directors and HEG’s shareholders and is expected to close in the second quarter of 2017, subject to customary regulatory and other closing requirements.

HEG is currently owned by Cinven, one of Europe’s leading private equity firms, which acquired the business in August 2013. GoDaddy intends to integrate the majority of HEG’s business while exploring strategic alternatives for HEG’s PlusServer managed hosting business, including a possible sale.

As the largest privately-owned web services provider in Europe, HEG serves small businesses and web experts, and has built a thriving business with more than 1.7 million customers. With strong positions in the UK and Germany, including brands such as 123Reg, Domain Factory, Heart Internet and Host Europe, HEG complements GoDaddy’s leading position in the US and fast-growing international footprint.

Combining GoDaddy’s global technology platform with HEG’s footprint in Europe will enable the rapid deployment of a broader range of products to customers and allow for better scale of product development and go-to-market investments across both companies. GoDaddy and HEG share a strong cultural focus on the needs of small business customers, supporting their product offerings with consultative customer care that drives high customer retention.

“GoDaddy has successfully expanded its international business to 56 global markets over the past four years,” said GoDaddy CEO Blake Irving. “HEG has built an impressive business that generates strong top-line growth, high margins, and industry-leading customer satisfaction. By joining forces with HEG, we accelerate our expansion into Europe with the delivery of a broader range of cloud-based products, built on a single global technology platform, and supported by unparalleled customer care to help small businesses and web designers succeed online.”

“In combining with GoDaddy, we see a remarkable opportunity for our customers, partners and the small business ecosystem in Europe,” said Patrick Pulvermüller, Group CEO of HEG. “What stands out is the strategic alignment of the companies – we’re both driven to empower people to transform their ideas and bring them to life online. Together GoDaddy and HEG will provide even more value for our customers and introduce new solutions to help their ventures succeed.”

Patrick Pulvermüller will lead the combined company’s European operations. He will report to Andrew Low Ah Kee, GoDaddy’s Executive Vice President of International. GoDaddy’s European team will report into Pulvermüller.

HEG serves similar customers to GoDaddy’s core customer base – namely, small ventures and the web professionals who support them. HEG has reported consistently strong top line and cash flow growth and is on track to generate approximately US$328 million in bookings and approximately US$139 million in adjusted EBITDA in 2016. The purchase price of €1.69 billion (US$1.79 billion), represents approximately 11x HEG’s 2016 estimated adjusted EBITDA including anticipated annual synergies. Financing for the transaction has been committed by existing lenders at interest rates similar to GoDaddy’s existing term loan.

HEG today includes the PlusServer brand which serves larger, more mature companies that require a dedicated field sales force and account management. PlusServer is a high-quality business with a strong financial profile and world class management team. Because its business model differs from GoDaddy, GoDaddy intends to explore strategic alternatives for the PlusServer business, which is expected to generate approximately US$92 million in bookings and US$41 million in adjusted EBITDA in 2016.

HEG also owns the World Hosting Day and NamesCon brands and conferences, mainstays in the global website hosting and domain communities. GoDaddy will continue to operate these brands independently and invest in their continued growth.

HEG has offices in Germany, the U.K., France, Spain, Romania, and Bulgaria.

GoDaddy does not provide reconciliations from non-GAAP projections to GAAP, because these reconciliations are not possible without unreasonable effort, and presentation of such reconciliations would imply an inappropriate degree of precision.

 

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