The deal is valued at £438 million (€510 million, $668 million). It is the fifth acquisition made by Cinven’s Fund V, which reached its final close in June on €3.3 billion.
No returns figures were disclosed on the sale, but a source close to the matter said that Montagu was expected to make more than twice its overall investment through the exit. Still subject to regulatory approval, it is expected to close in September this year.
Established in 1997, Host Europe is the largest privately-owned provider hosting and domain services in Europe. It manages more than five million domains on behalf of around 1.5 million wholesale and retail customers, and generates most of its revenues in the UK and Germany, where it is the market leader.
Montagu bought the business for £222 million in October 2010. It has since led the group through a phase of organic expansion and bolt-on acquisitions, allowing it to sales posted by the company to grow by around 60 percent over the period.
The deal marks the firm’s sixth exit in 2013, which have also included hair styling brand ghd, airfield services provider ADB, logistics group Unifeeder and clothing business Hansen Protection. These have allowed Montagu to return over €1 billion to investors since the beginning of the year, according to a source.
Cinven expects the business to post double digit annual growth over the coming years, on the back of structural trends in cloud computing and increasing migration online of the continent's smaller companies.
“There is a continued need for web presence among European SMEs as well as a long-term trend towards outsourcing of business IT, ” David Barker, a parner at Cinven, told Private Equity International. “And it's still a relatively fragmented industry.”
This acquisition follows on previous investments made by the firm in the IT sector. These have included Spanish travel booking business Amadeus IT Holding, whose 2010 IPO allowed Cinven to reap a 7x return on its original investment, as well as CPA Global, a provider of intellectual property management software, in March 2012.
Other investments by the firm's Fund V have included CeramTec, a German ceramics maker bought in June for 1.5 billion, and AMCo, a UK pharmaceuticals business valued at more than €1 billion it established last year.