Private Equity Fund Buy Stake in United Internet 1&1

Wed, 9th November 2016, 09:38

Private equity fund Warburg Pincus has agreed to buy a third of the web hosting business of Germany’s United Internet’s 1&1 brand for 450 million euros ($497 million). The deal puts a dollar value on the company at 2.55 billion euros ($2.82 billion), including debt.

That price tag gives the business a valuation of 12.5 times its expected 2016 earnings before interest, tax, depreciation and amortization (EBITDA), United Internet CEO Ralf Dommermuth said.

The transaction offers 1&1 Internet SE flexibility with regard to future strategic options, including a potential IPO in the coming years. It's a stepping stone to an IPO. It won't be 2017 he said. Things sometimes don't turn out as planned.

United Internet had already raised prospects for a possible flotation of the business last year, when it said it would use proceeds from an initial public offering (IPO) to fund acquisitions.
Under the deal agreed on Tuesday, a holding company of Warburg Pincus will pay up to 450 million euros for the stake in the business, based on an equity value of 1.35 billion euros.
Around 334 million euros of the purchase price are to be paid in the first half of next year, with the rest to be transferred at later stages, depending on certain performance milestones and foreign exchange rate movements.

Shares in United Internet, which will keep a 66.7 percent stake in the web hosting business, turned positive on the news and were up 5 percent at the closing bell to top Germany’s technology index. Last month United Internet and Warburg Pincus were said to be teaming up for a bid for rival German web-hosting provider Host Europe Group (HEG) which is being sold by private equity group Cinven.

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