Report: Deutsche Telekom Considers Host Europe Acquisition

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Host Group Europe’s search for buyers may be drawing to a close, according to a report that Deutsche Telekom is considering acquiring the company from private equity parent Cinven. Five different sources close to the situation told Reuters that Deutsche Telekom is seeking US private equity partners to help fund a deal to merge HEG with its web hosting subsidiary Strato.

Investment firms Hellman & Friedman and Blackstone were named by several sources as among those considering participation. None of the companies named in the report commented. Deutsche Telekom has business relationships with both firms, and CEO Tim Hoettges has expressed comfort with private equity partnerships, according to the report.

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In April a report indicated that Cinven had put HEG up for sale with a €1.7 billion sticker price and mentioned Hellman & Friedman among firms that might be interested. That price puts HEG’s multiple to earnings of €140 million at just over 12 times, which is comparable to GoDaddy’s multiple and significantly higher than competitors Rackspace and Endurance International Group.

Strato was acquired by Deutsche Telekom in 2009 for €275 million. One of Reuters’ sources said it has core earnings of around €30 million and its enterprise worth is about a quarter as much as HEG.

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Potential bidders for HEG would have to consider the value of both its mass market and managed hosting businesses, according to the report.

Deutsche Telekom announced intentions to double its business cloud revenue by 2018 and become the leading cloud platform provider for businesses in Europe when extending a partnership with Huawei to include public cloud a year ago. Adding HEG’s customers, products and team would be a significant move towards that goal.

This first ran at http://www.thewhir.com/web-hosting-news/report-deutsche-telekom-considers-host-europe-group-acquisition