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Web hosting giant acquired by private equity firm, sparking legal battle

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As rumored last month, web hosting giant Endurance International Group (EIG) has been sold - but not to VPN specialist J2 Global as expected.

The owner of well-known web hosting and best website builder brands such as Hostgator, Domain.com, Bluehost, Constant Contact and Resellerclub was worth around $859 million last month, but private equity firm Clearlake has agreed to pay a significant premium and handle the enormous outstanding debt.

In total, the all-cash deal is valued at $3 billion, putting the price of Endurance at $1.34 billion (a near 64% premium) and outstanding debt at $1.66 billion.

EIG deal

Not all parties are happy with the sale, however. Given the fact that EIG shares are on a steep upward trajectory - having risen by 541% since March - some shareholders feel the business was actually under-priced.

Shortly after the announcement, litigation law firm Brodsky & Smith LLC announced it will investigate potential claims against the EIG Board of Directors for “possible breaches of fiduciary duty and other violations of federal and state law in connection with the agreement to be acquired by Clearlake Capital Group”.

The investigation will look into “whether the Endurance Board breached its fiduciary duties to shareholders by failing to conduct a fair process and whether Clearlake is paying too little for the company”.

Over the past two decades, EIG has acquired dozens of brands and its approach to onboarding web hosting companies has often been controversial. It missed the boat when website builders took off, which explains why GoDaddy, Wix and Weebly all have market capitalizations far higher than EIG’s.

Managing Editor, TechRadar Pro

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website building and web hosting when DHTML and frames were en vogue and started writing about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium. Then followed a weekly tech column in a local business magazine in Mauritius, a late night tech radio programme called Clicplus and a freelancing gig at the now-defunct, Theinquirer, with the legendary Mike Magee as mentor. Following an eight-year stint at ITProPortal.com where he discovered the joys of global techfests, Désiré now heads up TechRadar Pro. He has an affinity for anything hardware and staunchly refuses to stop writing reviews of obscure products or cover niche B2B software-as-a-service providers.