European buyout house Cinven has agreed to sell web services provider Host Europe Group to domain and hosting giant GoDaddy in a €1.69 billion deal.
It is understood the sale will deliver a return of 2.6x to investors in the €5.3 billion Fifth Cinven Fund.
The purchase price includes €605 million paid to the selling shareholders and €1.08 billion in assumed net debt. It represents approximately 11x HEG’s 2016 estimated adjusted EBITDA including anticipated annual synergies, according to a statement from GoDaddy.
The transaction has been approved by GoDaddy’s board of directors and HEG's shareholders and is expected to close in the second quarter of 2017, subject to regulatory approval.
HEG is the largest privately-owned web services provider in Europe, serving more than 1.7 million customers. It has a strong position in both the UK and Germany, through brands including 123Reg, Domain Factory, Heart Internet and Host Europe, GoDaddy said.
The acquisition of HEG “complements GoDaddy's leading position in the US and fast-growing international footprint”, the company said.
“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,” GoDaddy CEO Blake Irving said in the statement.
Cinven acquired the core business within HEG in August 2013 for £438 million. The firm then commenced a buy and build strategy, which included four significant acquisitions – Telefonica Online Services, Domainfactory, Intergenia and Paragon – and a number of smaller acquisitions.
Under Cinven’s ownership, HEG consolidated its businesses to six primary brands from more than 20 deals completed since the company was founded, improved its organisational structure to function as an integrated group, and introduced new products in exiting business units and rolled out existing products across the group.
It also invested in strengthening its management team, promoting Patrick Pulvermüller from COO to CEO and appointing new divisional CEOs for both mass hosting and managed hosting.
Pulvermüller will lead the combined company's European operations, reporting to GoDaddy's executive vice president of international Andrew Low Ah Kee.
Cinven’s sale of HEG to GoDaddy follows the agreement to sell German-headquartered residential and technical lighting provider SLV Group to Paris-headquartered Ardian in October in a deal set to generate a return of more than 2x for investors in the Fourth Cinven Fund.
The firm also recently exited Italy-headquartered space launchers and space propulsion operator Avio Space Propulsion to Space2 and Leonardo-Finmeccanica.
In June Cinven closed its latest buyout vehicle, The Sixth Cinven Fund, on €7 billion after just four months in market. The fund had a re-up rate of more than 90 percent, as reported by PEI.
Investors in the Fifth Cinven Fund include the Canada Pension Plan Investment Board, Oregon Public Employees Retirement Fund, Aberdeen Asset Management, and Ilmarinen Mutual Pension Insurance Company, according to PEI data.
As at 30 June 2016 that fund was delivering a return of 1.24x and an internal rate of return of 12 percent, according to data from the Oregon Public Employees Retirement Fund.