Advised freenet, an alternative telecoms company, on the sale of its Strato web hosting business to Deutsche Telekom AG
Nov 2009
acquired by
$409 million
  • Sector: Cloud Managed Services
  • Deal Type: Strategic Deals; Public Deals
  • Engagement type: Sellside
  • Size: $409 million

Arma Partners is pleased to announce that it acted as exclusive financial advisor to freenet AG (DB: FNT) in relation to the proposed sale of its Strato webhosting business to Deutsche Telekom (DB: DTE) for a total consideration of €275m ($409m) in cash, which was announced on November 19, 2009. Strato AG provides webhosting and SaaS solutions to business and retail customers around Europe.

Closing of the transaction is subject to German Federal Cartel Office approval.

For the first 9 months of calendar 2009, freenet has reported revenues for its hosting business activities of c. €66m and EBITDA of c. €24m.

The disposal of Strato marks the continuation of freenet’s strategy to concentrate on mobile and mobile Internet. With the acquisition of debitel Group in July 2008, freenet became a leading mobile services provider with c. 19m subscribers and c. 20% of the overall German mobile market. In May 2009, freenet also announced the disposal of its DSL Internet access business.

The proposed sale of Strato is the fourth transaction on which Arma has worked with freenet, having advised on freenet’s €123m sale of its DSL business to United Internet AG (May 2009), its €1.6bn acquisition of debitel Group (announced April 2008) and its acquisition of Tiscali’s German broadband and narrowband contracts (January 2007).

– Headquartered in Berlin, Germany, Strato AG provides subscription-based, on-demand managed software, supplied around a shared or dedicated hosted domain and web space offering

– The company increasingly adds SaaS offerings for business users, such as homepage builder, fully-equipped eShops and online storage and back-up

– Measured by 1.4m subscription contracts and over 4m hosted domains, Strato is the number 2 web hoster in Europe

– With presence in 50 countries worldwide and a market capitalisation of over €42 billion, Deutsche Telekom is one the world’s leading telecommunications and information technology companies

– Deutsche Telekom provides network access, communications services and value-added services via fixed and mobile networks

– The transaction makes Deutsche Telekom number two for webhosting products in Germany

– Strato enlarges Deutsche Telekom’s existing webhosting platform, providing the combined business with attractive opportunities for further growth domestically and in the rest of Europe and expands Deutsche Telekom’s value-added services offers to residential and SME customers

– Strato will make a positive contribution to net income and free cash flow to Deutsche Telekom

– The disposal of Strato marks the continuation of freenet’s strategy to concentrate on mobile and mobile Internet, which freenet embarked on after acquiring debitel in July 2008

– Arma Partners has a longstanding relationship with freenet, having been retained as lead financial advisor on four assignments, including the transformational €1.6bn acquisition of debitel in 2008

– Arma structured a two stage auction process for Strato, with Stage 1 focusing on educating potential acquirers about the value and potential of Strato’s unusual, software-centric, managed webhosting business model

– Arma proactively contacted buyers on a global basis as well as evaluated inbound expressions of interest. A rigorous selection process was used so as to maintain a manageable process in an environment of extremely strong buyer interest

– The process was constructed to meet the detailed requirements both of strategic and of financial buyers, including the needs of financing providers

– Through a carefully executed process, Arma managed to maximise the exit value for freenet AG