According to the announcement, Deluxe, which "helps financial institutions and small businesses better manage, promote, and grow their businesses," will acquire Hostopia in an all-cash deal that values the company at approximately $124 million Canadian.

The merger agreement will see Deluxe pay $10.55 for each outstanding Hostopia common share.

In July 2006, Hostopia filed its IPO, intending to raise approximately $40 million.

"We are very excited with the prospect of providing Hostopia's industry-leading, private-label web services to our small business customers and collectively growing our product and service offerings as we move forward together," said Lee Schram, CEO of Deluxe, in the press release.  "Hostopia has grown top line revenue in excess of 20 percent in each of the last three years. While we have substantial knowledge and expertise in selling to the small business market, we believe that Hostopia's ability to attract new customers and provide additional services to that market will increase the power of our offerings. This acquisition is in line with our long-term strategy of broadening the products and services we offer to small businesses to manage, promote and grow their businesses. We also believe that the transaction will offer significant value to our shareholders as we continue to introduce growing products and services with recurring revenue streams."

Much of Hostopia's web hosting business is of the private label variety. The company offers its services to resellers, many of them large telecommunications providers. However it also has a certain amount of direct business. In May, the company paid $1.6 million to private label Internet services company Tucows to acquire its shared hosting assets, including about 14,000 customer accounts associated with its Domain Direct, NetIdentity and ItsYourDomain brands.

According to Hostopia CEO Colin Campbell, following the transaction, Hostopia customers would have access to a range of services from Deluxe that includes small business logo design, print-on-demand services and email marketing. At the same time, Deluxe would offer a new channel through which to distribute Hostopia's services.

The deal with Deluxe has been approved unanimously by the boards of both companies, and is structured as a merger, says Hostopia. The deal remains to be approved by Hostopia stockholders, which will be sought at a special meeting called to consider the transaction. The announcement doesn't specify when the meeting will take place.

Hostopia says stockholders holding approximately 35 percent of the company's outstanding shares have agreed to vote in favor of the transaction.

"We believe the transaction delivers outstanding value to the Hostopia stockholders," says Campbell, also quoted in the press release. "Deluxe and Hostopia have many similarities, including a desire to help small businesses grow and promote their businesses."

UPDATE: After speaking with Hostopia's Paul Engels and Deluxe's Terry Peterson, theWHIR posted a feature story discussing the synergies of the deal.