PEER 1 Bought by Cogeco in $635 Million Deal

PEER 1 Hosting has been acquired by Cogeco Cable in a $635 million deal that will combine two Canadian service providers. The transaction is the latest example of a telecommunications company acquiring a data center service provider in hopes to boosting its revenue from cloud computing and other hosting services.

Cogeco has offered to buy shares of PEER 1 for $3.85 per share, or about a 32 percent premium to their previous market value. The board of directors for PEER 1 has unanimously supported the offer, following the advice of a special committee created to evaluate the offer.

The Web Host Industry Review looks at the strategy behind the sale of PEER 1:

According to Phil Shih, managing director at Structure Reasearch, the deal might actually see Cogeco push PEER 1 further in the direction of providing managed hosting in Canada.

“From a Canadian market perspective, this acquisition is mostly about colocation,” says Shih. “Managed hosting revenue is mostly generated from the US and now the UK. PEER 1 only  began to sell hosting in Canada a few years back. So it will be very interesting to see what Cogeco’s plans are for the international operations. My sense is that Cogeco is going to take advantage of the PEER 1 brand and platform to make a stronger push into managed hosting in Canada. Managed hosting is where Cogeco wants to go and where it is getting stronger growth.”

As with similar acquisitions in the past, there may be a significant opportunity in addressing the existing base of Cogeco customers with PEER 1’s hosting services. Cogeco serves a substantial number of small businesses with its telephone and connectivity offerings.

For full coverage, see Liam Eagle's story at The WHIR.