United Internet agree to buy web hosting business Strato in $629m

Company - Pavan Pandey - Dec 19,2016

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united internet agree to buy web hosting business strato in 629m dollar

German Internet services provider company, United Internet, has agreed to purchase Deutsche Telekom AG’s Strato AG for around 600 million Euro ($629 million).

German Telecommunications Company, Deutsche Telekom AG, has sold its entire shares in cloud service provider Strato to United Internet in a 600 Euro cash deal. United Internet will buy 100% of Strato AG shares just under 12.4 times the hosting corporation’s expected 2016 EBITDA (earnings before interest, taxes, depreciation and amortization) of 48.5 million Euro. The purchase will add more than 2 million customer contracts and approx. 130 million euros in yearly sales to United Internet’s business.

United Internet made the agreement via a newly formed business application holding structure in which private equity group Warburg Pincus also attained a stake. The first amount of Euro 566 million is to be processed on the completion of the transaction which is estimated to take place in the mid of 2017. A further amount, up to 34 million Euro, will be paid upon the completion of main performance milestones.

Since the German telecommunication company bought Strato for EUR 275 million, the internet service provider has grown in terms of its worth. Over the last five years, Strato’s revenues have enlarged from 90 million Euro to an estimated 127 million Euro in 2016, while the EBITDA has mounted from 30 million euro to 49 million Euro. A Berlin-based subsidiary of Deutsche Telekom AG, Strato AG employs over 500 employees and it mainly provides its operation in Germany and Netherlands over 2 million customers.

On Thursday, United Internet Chief Executive Officer, Mr. Ralph Dommermuth said in a statement, the fresh acquisition of Strato AG will facilitate us to enlarge our top marketplace in the European hosting and cloud application business and it also drives the consolidation of a market which is presently powerfully fragmented.

The agreement is still subject to authorization from Germany's national competition regulator, the Federal Cartel Office.