Buyout Firm Grooms Dotcom Group For £400m Sale

One of Britain's most significant dotcom infrastructure providers is being groomed for a sale expected to value it at more than £400m.

I have learnt that Montagu Private Equity, a private equity firm, has appointed investment bankers at UBS (Xetra: UB0BL6 - news) to oversee a strategic review of Host Europe Group with a view to selling it later this year.

Host Europe is a titan of Britain's internet industry. It is responsible for the registration of roughly one-quarter of all .co.uk domain names, and numbers more than 1m UK-based small and medium-sized companies (SMEs) among its clients.

Montagu acquired the business in October 2010 from Oakley Capital, another private equity firm, for more than £220m. Insiders said today that Montagu, which sold the hair products brand GHD last weekend in a £300m deal, would make a handsome return on its investment in Host Europe.

People familiar with Montagu's plans said that it was not seeking a rapid sale of the dotcom services provider. UBS had been hired to undertake a 'market-testing' exercise that would involve approaching potential industry buyers of the company before beginning a formal auction, they said.

Host Europe provides an array of web-hosting services, including domain name registration, building websites and cloud computing.

If an eventual sale does achieve a price-tag of £400m or more, it would mean that Host Europe's value will have more than trebled in the space of just five years. Oakley paid £128m to buy it from Pipex, the telecoms group formerly run by Oakley founder Peter Dubens, one of Britain's most successful technology investors.

An industry analyst suggested that companies including TalkTalk, the broadband and technology company, would be among the potential buyers of Host Europe.

The company was formed from the combination of Host Europe and Webfusion, which owned 123-reg.co.uk, one of the most prominent domain name registration brands in the UK.

Revenues at Host Europe have soared as SMEs have turned to the internet to showcase their products and services. The company's business is split roughly equally between the UK and German markets.

A Montagu spokesman declined to comment.