GoDaddy in talks to buy Host Europe Group (HEG)

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GoDaddy in talks to buy Host Europe Group (HEG)

According to Reuters, GoDaddy is reported to be in exclusive talks to acquire one of the largest European hosting companies, the Host Europe Group, or HEG.

According to Reuters, GoDaddy is reported to be in exclusive talks to acquire the Host Europe Group, or HEG. While GoDaddy already has a worldwide presence in the hosting industry, its primary market is the United States. The purchase of one of Europe's largest hosting providers would be a significant expansion for the company.

GoDaddy has since April 2005 been the largest ICANN-accredited registrar, but for a long time struggled with their web hosting products, largely due to their custom control panel. This all changed in late 2013 when they announced the launch of their new cPanel hosting after the appointment of Microsoft Veteran Arne Josefsberg as new CIO, and Ben Gabler as Senior Product Manager.

Since 2014, GoDaddy has switched focus to helping small business, and this has shown with its move from raunchy Superbowl adverts to more sensible ones, as well as more recently significant updates to its product lines with that focus in mind. It has in recent years sought to acquire other services away from hosting and domains that add greater value to its product offerings, such as the acquisition of VOIP service FreedomVoice in May 2016 for $42 million.

HEG owns brands such as 123-reg, HeartInternet, Domain Factory, HostEurope, PlusServer, Server4You, WorldHostingDays, Paragon, and collectively are one of the largest web hosting companies in Europe. Interestingly, 123-reg is one of the biggest domain name suppliers in the UK.

HEG has not been without some controversy during 2016, with their brand 123-reg accidentally deleting many of their customers VPS, with no backups being available causing the loss of many customer websites and data. While this appears to be a one-off, we wonder how this may have affected the business.

GoDaddy's third-quarter results show a year over year increase in revenue of 15 percent to $472.1 million. It is evident GoDaddy's strategy to increase international growth is working, with a 27 percent growth in global revenue during that quarter.

According to Reuters, HEG is valued at around $1.8 billion, around 12 times its 2016 core earnings forecast of 140 million euros.

The bidding process has been heated, with GoDaddy beating rival bids from German internet service provider, United Internet, and buyout firm, Centerbridge. Other bidders, Deutsche Telekom, Permira and Interoute, pulled out earlier in the process.

Reuters reports that banks are “lining up debt financing to back a potential deal between the two parties, totaling around 1.5 billion euros, or 4.5 times combined EBITDA.”

It is unclear when the acquisition might be finalized, but reports indicate that financing could be in place by the end of the year.

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