GoDaddy reportedly in talks to acquire Host Europe Group, gaining 1.7 million customers

Claire Ruckin is reporting for Reuters that GoDaddy is in talks to acquire the Host Europe Group, known as HEG. HEG describes themselves on their website:

HEG is now one of Europe’s leading hosting providers, one of the largest domain registrars in the UK and a leading provider of Managed Hosting in Germany. We currently own or solely control 9 data centre facilities in Europe and USA, supported by over 1,300 employees. HEG has more than 1.7 million customers with over 7 million domain names under management.

HEG has 5 brands that they consider the core of their portfolio: 123 Reg and Domain Factory for mass market shared hosting, Host Europe and Heart Internet for a step up, and PlusServer for a managed hosting product.

Based on the $140 million “core earnings” number Reuters posts, it would increase GoDaddy’s hosting revenue by about 20%. HEG is also making money, with, “like-for-like adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 114 million euros on sales of 280 million,” in 2015.

GoDaddy is financing the deal and in the end, Reuters says it’ll be worth, “around 1.5 billion euros, or 4.5 times combined EBITDA.”

Sidenote: Here’s what EBITDA means, for those of you who were not at Publish’s first session 😉

I like this deal for GoDaddy. Any way they can bring in a profitable hosting company with an existing presence, outside of the US, it should be good for them. However, they did compete with others on the deal, most notably German ISP United Internet. I’m not the person to say whether it drove the price too high, but getting this many new customers and a footprint in the international market should be worth a pretty penny.

I imagine GoDaddy has learned from the mistakes of many big deals before them, that it is not a great idea to acquire a company only to tear it apart for a quick gain of customer accounts. It sounds like HEG has a pretty decent business going, and it would make sense to me to see GoDaddy develop those brands in existing markets — especially Germany, where HEG is strongest. Also new infrastructure in European datacenters should be quite valuable.

This acquisition also gives GoDaddy several new brands where they can market their Managed WordPress product, which of course you all know they sell at GoDaddy and Media Temple. Their software, hardware, and support infrastructure for their managed WordPress products was a big investment, and a new market to promote them will surely be welcome.

I spoke to multiple members of the GoDaddy team about this deal this week, and did not get confirmation that they are buying HEG. But I strongly suspect that it’s legit, and major props to Clarie Ruckin and the rest of the Reuters folks who originally reported it.