Cinven sells HEG to GoDaddy in €1.69bn deal

Kenny Wastell
07 December 2016

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Cinven has agreed to sell UK-based web services provider Host Europe Group (HEG) to trade buyer GoDaddy after a three-year holding period, in a deal valuing the business at тЌ1.69bn.

The sale will see €605m returned to the vendors, with the remaining €1.08bn consisting of assumed debt.

The deal values HEG at 11x its anticipated adjusted EBITDA for 2016. It also values the business at a significantly higher sum than the £438m EV at the time of Cinven's first investment.

Under the GP's tenure, the business has invested in new product development and undertaken an acquisitive growth strategy with a particular focus on the UK and German markets. It acquired German competitors Telefónica Germany Online Services (TGOS), Domainfactory and Intergenia in September 2013, October 2013 and December 2014 respectively, as well as bolting on UK-based Paragon Internet Group in November 2015 and acquiring a number of smaller competitors.

The business also made a series of appointments to the senior management team during Cinven's tenure, including the promotion of former COO Patrick Pulvermüller to CEO and the recruitment of new divisional CEOs for its Mass Hosting and Managed Hosting brands.

GoDaddy said in a statement that the European operations of the newly merged group will be led by HEG CEO Patrick Pulvermüller. It also said it is considering strategic options for HEG's PlusServer business following the deal, including a potential sale of the division.

Cinven's sale of GoDaddy marks the third exit by the GP in the space of two months, following the sale of Italy-based aerospace propulsion operator Avio Spazio and the €800m divestment of German lighting producer SLV Group to Ardian.

The HEG sale is expected to complete in the second quarter of 2017.

Previous funding
HEG first came under private equity ownership in April 2008, when it was acquired by Oakley Capital in a £120m deal, according to unquote" data. Montagu Private Equity then backed the £222m MBO of the company just two years later, with capital drawn from its third fund.

Cinven acquired HEG from Montagu in July 2013 in a deal valued at £438m. It drew capital for the transaction from its €5.3bn fifth fund. The GP also provided follow-on funding to support the bolt-on of TGOS three months later.

Company
Founded in 1997 and headquartered in Hayes, Middlesex, HEG is a web services provider. It has around 1.7 million customers, with a primary focus on the UK and Germany. Its brands include 123Reg, Domain Factory, Heart Internet and Host Europe.

According to a GoDaddy statement, HEG generates a turnover of $328m with adjusted EBITDA of $139m.

People
Cinven – David Barkerv (partner); Thomas Railhac (senior principal).
Host Europe Group – Patrick Pulvermüller (group CEO).

Advisers
Vendor – Deutsche Bank (financial due diligence); Freshfields Bruckhaus Deringer (legal); OC&C (commercial due diligence); Deloitte (financial due diligence); EY (tax).