United Internet acquires Strato

CashThe parent company of 1&1 Internet, United Internet, has acquired Strato, a web hosting and domain registration provider. The acquisition of Strato is the latest known deal in the web hosting industry. United Internet will be adding a number of new customers, a new brand, and access to more talent after the closing of the deal.

Strato is a German based web host that provides: domain registration, servers, email hosting, and cloud hosting solutions.  United Internet will be paying around €600 million euros for Strato. With a small portion of the deal based on performance after the deal closes. The deal is expected to close sometime before the first half of 2017.

Press release:

United Internet acquires hosting specialist Strato

Montabaur, December 15, 2016. United Internet AG today signed an agreement with the owner of Strato AG, Deutsche Telekom AG, regarding the acquisition of Strato AG.

Based in Berlin, Strato employs over 500 people with operations mainly in Germany and the Netherlands and over 2 million customer contracts. Strato’s annual revenue for fiscal year 2016 is forecasted to be around EUR 127 million with anticipated EBITDA 2016 of around EUR 48.5 million.

The Strato product portfolio ranges from domains, e-mail packages, complete website packages, webshops, servers, to online storage and individual high-end hosting solutions. The business operates from the company’s two own high-performance data centers in Berlin and Karlsruhe.

The purchase price for 100% of Strato’s shares is around EUR 600 million and will be settled in cash. An initial amount of approx. EUR 566 million is payable after the expected closing in the first half of 2017. A further amount of up to EUR 34 million is due at a later point subject to certain performance goals.

The acquisition of 100% of shares in Strato AG will be made via a holding structure to be established as part of the recently announced investment of Warburg Pincus* in United Internet’s Business Applications division.

“The acquisition of Strato will enable us to expand our leading market position in the European hosting and cloud application business and drive the consolidation of a market which is currently still strongly fragmented. In future we will offer our customers products and services with even greater performance,” states Ralph Dommermuth, CEO of United Internet, in his summary of the reasons for the planned acquisition.

“We are delighted by United Internet’s investment. The cultures of the two companies fit perfectly together,” commented Dr. Christian Böing, CEO of Strato. “We will use the resulting potential and synergies from the combination to drive growth in the hosting market and offer our customers even better products.”

The share purchase is still subject to the usual approval by the German Federal Cartel Office (“Bundeskartellamt”).

* WP XII Venture Holdings S.a.r.l., an affiliate of private equity funds managed by Warburg Pincus LLC (collectively: “Warburg Pincus”)