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GoDaddy May Buy Host Europe Group, Banks Keen to Finance


Leading domain registration and web hosting provider GoDaddy Inc. GDDY is reportedly in talks to acquire Host Europe Group (HEG), a European web hosting provider.

Host Europe Group was purchased by private equity owner Cinven in 2013 for £438 million and since then has done well to evolve as Europe's largest independent web hosting firm.

Per a report from Reuters yesterday, 24 banks including Barclays, Deutsche Bank, Morgan Stanley and Royal Bank of Canada (RBC) are ready to debt finance this potential sale for $1.5 billion. It appears that Europe’s highly liquid loan market is eagerly waiting to grab the opportunity.

GoDaddy, backed by KKR and Silver Lake, has out bidden Warburg Pincus backed German Internet service provider United Internet, and Centerbridge while Deutsche Telekom and Permira had withdrawn from the bidding process last month.

If the deal materializes, financing could start before the end of this year.


Our Take

The acquisition will significantly boost GoDaddy’s Hosting and Presence revenues. Last quarter, this business generated $174.1 million and accounted for 36.9% of total revenue. It grew 3.9% sequentially and 4.2% year over year. The company reported better-than-expected earnings and revenues in the last quarter. (See More: GoDaddy Beats Q3 Earnings and Revenue Estimates).

The acquisition will also help GoDaddy strengthen its foothold in the European market. Going forward, investments in products, its technology platform and customer care as well as delivery of innovative and increasingly personalized products and services globally should drive shareholder value.

Zacks Rank & Stocks to Consider

Currently, GoDaddy has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA, Kimball Electronics, Inc. KE and Control4 Corporation CTRL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For the current year, the consensus estimate for NVIDIA has increased 33.3% in the past 30 days. Estimates for Kimball Electronics and Control4 have gone up by 8.1% and 10%, respectively, over the same time frame.

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