United Internet Delays IPO as it Sells Hosting Stake to Warburg Pincus

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United Internet has sold a third of its Business Applications unit, which includes 1&1 Hosting and several other web services brands to private equity firm Warburg Pincus for €450 million (roughly $496 million). United Internet also announced Tuesday it will delay a previously planned IPO.

The deal, which implies the division’s equity value is €1.35 billion, once €1.2 billion in debt is deducted, involves former Deutsche Telekom CEO and current Warburg Pincus managing director Rene Obermann joining its advisory board. In addition to 1&1 brands, the unit also includes GMX, mail.com, WEB.DE, Fasthosts, and the recently acquired home.pl.

United Internet CEO Ralf Dommermuth said in a call with journalists that United Internet would delay an IPO previously planned for 2017 to make further investments and acquisitions, Reuters reports.

United Internet announced it was considering spinning out its business applications division in July. Structure Research managing director Philbert Shih told the WHIR at the time that garnering more investment resources is crucial for United Internet’s hosting assets to compete with Web.com, GoDaddy, and Endurance International for SMB market share.

Shortly before that, United Internet was reported to be considering making an offer to Cinven for its subsidiary Host Europe Group, or possibly increase its stake in German wireless operator Drillisch, but was thought to lack the resources to do both. Warburg Pincus manages over $40 billion in private equity assets, so that may no longer be the case. “Deal cost” information on Cinven’s website indicates that Host Europe’s price tag would be well over $700 million.

The Business Applications unit reported a 7.7 percent rise in revenues to over €1 billion for the 2015 fiscal year, with EBITDA rising 23.3 percent to €281.9 million.

Shares in United Internet, which retains the other two-thirds of the unit, surged by over 5 percent to €38.76 on news of the deal, which is pending the usual regulatory approval.

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