Network Solutions To Be Acquired by Web.com
101 Domain

Breaking: Network Solutions To Be Acquired by Web.com

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Web.com made news less than a year ago when the company acquired Register.com for $135 million. I just received a press release announcing another major domain name registrar acquisition in the works: Network Solutions. The company is set to pay $405 million in cash plus stock, pending shareholder and regulatory approval.

According to the release below: “upon the closing Web.com will pay Network Solutions $405 million in cash and issue 18 million shares of Web.com common stock, in addition to refinancing existing net debt of Network Solutions and paying certain fees.”

At the present time, the NetSol is privately owned by General Atlantic LLC, a growth equity firm. The release also stated that “the transaction, which is subject to Web.com shareholder approval as well as customary regulatory approvals and closing conditions, is expected to be completed in the fall of 2011. At the close, General Atlantic and other current Network Solutions shareholders are expected to own approximately 37% of Web.com.

According to Webhosting.info, Network Solutions reportedly has 6,313,988 domain names under management, and it is ranked the fourth largest domain registrar. Register.com reportedly has 2,362,587, and it’s the tenth largest domain registrar. Combined, this would be enough to move into the third spot, just ahead of Tucows.

Press Release:

JACKSONVILLE, FL and HERNDON, VA – August 3, 2011 – Web.com (Nasdaq: WWWW), a leading provider of internet services and online marketing solutions for small and medium-sized businesses (SMBs), and privately-held Network Solutions, a leading provider of website services, online marketing and global domain name registration focused on the needs of SMBs, today announced the signing of a definitive agreement for Web.com to acquire Network Solutions.

The transaction will create a leading end-to-end online solutions company with a clear path to $500 million in non-GAAP revenues as it focuses on providing web services to SMBs, a market estimated to be larger than $19 billion. Web.com believes its combined company will be positioned to deliver non-GAAP revenue growth in the low teens, with non-GAAP earnings per share and unlevered free cash flow growth in the mid-teens to 20 percent range over the next three to four years as revenue and cost synergies are realized. In particular, under current debt pricing terms, the transaction is expected to be at least 20 percent accretive to the $1.22 per share current First Call consensus estimate for 2012, with significantly greater accretion in 2013.

Under the terms of the agreement, upon the closing Web.com will pay Network Solutions $405 million in cash and issue 18 million shares of Web.com common stock, in addition to refinancing existing net debt of Network Solutions and paying certain fees. Network Solutions is currently majority owned by General Atlantic LLC, a leading global growth equity firm.

“This transaction represents a unique opportunity to dramatically expand our scale, add further momentum to Web.com’s already improving top line growth, and further expand our market share as the nationally recognized go-to provider of online marketing solutions specifically tailored to small and medium-sized businesses,” said David Brown, Chairman and CEO of Web.com. “Our integration strategy will be similar to our successful acquisition of Register.com, and we will be in a strong position to cross-sell and up-sell our services to Network Solutions’ approximately two million retail customers and hundreds of thousands of wholesale customers. We believe this combination will provide significant long-term shareholder value as we grow our business, capitalize on synergies, improve our margins and generate substantial cash flow to invest greater resources in growth and branding initiatives.”

“The acquisition of Network Solutions immediately delivers enormous scale to Web.com and better enables us to capitalize on the significant shift from traditional marketing channels to online marketing as mass adoption by SMB’s continues. Small and mid-sized businesses are increasingly looking to leverage the growing adoption of online local search, social media and mobile devices to grow, and they need cost-and time-efficient help. No other company has the combination of products, services and experience to help small and medium businesses as effectively as Web.com. Our combined organization will have far greater resources to market our end-to-end suite of solutions, in addition to using the power of a national brand for the first time in our history,” Mr. Brown continued.

Anton Levy, a Managing Director of global growth equity firm General Atlantic, the principal stakeholder in Network Solutions, said, “As growth investors, we are very excited to participate alongside other Web.com stockholders in its exciting strategy to be the web services and online marketing resource for SMBs. With this transaction, Web.com wins the race to scale, which is critically important at this moment in the shift to online marketing by small and medium-sized businesses.”

Tim Kelly, CEO of Network Solutions, stated, “Network Solutions has been a pioneer in this industry for nearly 30 years. We are very excited to combine our expertise, resources, customers and award winning customer service with Web.com. Our combined company will have tremendous know-how and a broad portfolio of online marketing, web services, social media and mobile solutions to help small businesses grow in the increasingly connected online world. For Network Solutions and Web.com, we will be positioned to capitalize on the more than $19 billion online services market for small and medium businesses in ways that neither company could do efficiently on a standalone basis.”

The transaction, which is subject to Web.com shareholder approval as well as customary regulatory approvals and closing conditions, is expected to be completed in the fall of 2011. At the close, General Atlantic and other current Network Solutions shareholders are expected to own approximately 37% of Web.com. In addition, as part of the acquisition agreement, Mr. Levy will join the Web.com board of directors.

Creates a market leader focused on small to mid-sized businesses
The combination of Web.com and Network Solutions will create a single company anticipated to have pro forma, combined non-GAAP revenue in the mid-$450 million range for 2011 and pro forma adjusted EBITDA of at least $120 million for 2011 before cost synergies and transaction expenses.

In addition, as of June 30, 2011, the pro forma combined company has:

–Approximately 3 million paying subscribers
–More than 9 million domains under management
–More than 1,900 employees worldwide

Both Web.com and Network Solutions utilize a high volume, multi-channel customer acquisition strategy that includes call centers, online and direct marketing, as well as distribution partners. Each markets a broad suite of solutions that include domain name services, web services, online marketing, eCommerce and other related solutions designed and delivered specifically for small and mid-sized businesses. With the infusion of Network Solutions’ two million retail customers and hundreds of thousands of wholesale customers, Web.com will have a tremendous opportunity to cross-sell and up-sell its online marketing, Facebook, mobile and web services offerings. In addition, Web.com’s current approximately one million subscribers will be offered a number of Network Solutions products and services that are complementary to Web.com’s product suite.


About The Author: Elliot Silver is an Internet entrepreneur and his company earns revenue from domain names. Elliot is President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Elliot is the publisher of DomainInvesting.com. Read this blog's disclaimer for information about the publisher, comment policy, disclosures, and conflicts.

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Comments (9)

    paul

    I hate register.com
    When you want Aut Code you have to wait 4-5days to get it.
    Even After 5days I got refusal to get Aut Code without reason and had to waste my time and contact them and beg for it.
    their prices are ridiculous for e.g. .co renewal 40usd.
    It was nightmare dealing with them.
    I am also interested in your experiences with them if you had any.

    August 3rd, 2011 at 4:46 pm

      Elliot Silver

      @ Paul

      I had that experience once and it was VERY frustrating. The second time around, I was able to do some research and spoke with someone on the phone and got it right away. It may be a pain in the you know what to find people and get things done, but you gotta do what you gotta do.

      August 3rd, 2011 at 4:51 pm

    Larry

    This works out to $88 per domain.

    For register.com it was $57 per domain.

    August 3rd, 2011 at 5:42 pm

    Elliot Silver

    @ Larry

    I believe NetSol charges much more for its domain names. Perhaps there are hosting accounts as well taken into consideration.

    August 3rd, 2011 at 5:43 pm

    Dan

    Hi Elliot,

    Your just way to fast…I ran a bad 3rd to you and “MHB” with trying to get this news out first ;)

    If you look at the domaining home page right now.

    I did manage to get it out 6 mins faster than Andrew @ domain name wire, how I even managed that I will never know, as Andrew is great at getting very good information out extremely fast …lol

    Just thought it was a bit amusing :)

    Nice job…

    Have a great day!
    ‘D’

    August 3rd, 2011 at 6:24 pm

    Larry

    “I believe NetSol charges much more for its domain names. Perhaps there are hosting accounts as well taken into consideration.”

    Agree and also without knowing the exact breakdown of customers and what they are paying (wholesale vs. retail) and how much is for hosting and other services it is hard to say what they bought. Or if they acquired physical assets of value as well (like office buildings etc.) or accounts receivable and/or liabilities.

    Much of this will end up in the SEC documents when the deal closes though.

    Note also if the deal doesn’t close they get hit with a 37 million termination fee (for specific conditions). That’s almost twice the amount of cash they have on hand.

    http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=8075504-3111-6604&type=sect&TabIndex=2&companyid=105057&ppu=%252fdefault.aspx%253fcik%253d1095291

    August 3rd, 2011 at 6:49 pm

    Elliot Silver

    Also interestingly, Net Sol has been heavily advertising discounted domain prices via Adwords. Not sure how long it’s been going on, but I wrote about it several weeks ago:

    http://www.domaininvesting.com/interesting-network-solutions-adwords-special-offer-8057

    August 3rd, 2011 at 6:51 pm

    jotbuzz.com

    Net Sol is great company I’m really glad they were acquired.

    August 4th, 2011 at 4:25 am

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