US-based Endurance International Group Inc, a provider of cloud-based SMB solutions, has struck a deal to buy Mumbai-based Directi Web Technology Pvt Ltd among other group entities for $110 million (Rs 700 crore). Controlled by Warburg Pincus and Goldman Sachs, Endurance has also filed with the US Security and Exchange Commission (SEC) to raise up to $400 million in an initial public offering.
Established in 1998 by Bhavin Turakhia (19 years of age then) along with his brother Diyank with Rs 25,000 ($600 back then) lent by his father, Directi develops innovative mass-market web products with more than 25 offerings. The company has more than 1 million customers across the world and more than 1,000 employees. The combined product portfolio of various Directi businesses includes communication and collaboration apps, social networking software, instant messaging, context analysis engines, anti-spam and antivirus solutions, large-scale billing and provisioning platforms, traffic monetisation solutions, online ad solutions and web hosting control panels.
The deal is for selling a part of the overall business. Given the product and service basket of the group, it could not be immediately ascertained which business units are being retained by the Turakhias. In an interview with Techcircle.in last year, Bhavin Turakhia had said the overall group is valued at $350 million. He had also said that he was looking to raise around $50-100 million in funding for the company's subsidiary Radix FZC. It could not be immediately ascertained if the deal also includes Radix.
As per the SEC filing by Endurance on Tuesday, last month it entered into a master-share purchase agreement to acquire all of the outstanding capital stock of Directi Web Technology from Directi Technology Holdings Inc, for an amount estimated to be between $100 million and $110 million in cash or, at the election of the seller, a combination of cash and shares of its common stock, subject to conditions.
Directi provides web presence solutions to SMBs in various countries, including India, the US, Turkey, China, Russia and Indonesia. The acquisition is expected to close during the fourth quarter of 2013.
In connection with the deal, Endurance has paid $5 million to Directi Holdings, which will be credited against the purchase price and will be refunded if the acquisition does not close for specified reasons.
Under the agreement, Endurance will pay around half of the total price in cash at the closing of the acquisition (after factoring out the $5 million it paid initially). It will also issue a promissory note to Directi Holdings for the balance due with the note maturing on April 15, 2014. At maturity, it will be obligated to pay an amount equal to the greater of the original principal amount of the promissory note or the annualised revenues associated with the Directi business for specified periods.
If the acquisition closes after the completion of Endurance's public issue, Directi Holdings may choose to pick shares of Endurance in lieu of the balance due amount.
Endurance said that in addition, it has entered into agreements with entities affiliated with Directi Holdings related to participation in the auction of new top level domain extensions and domain monetisation activities. Pursuant to this, it may make aggregate cash payments of over $62 million more.
Founded in 1997 by Indian-origin Hari Ravichandran, Endurance is a leading web-hosting solutions provider which owns a slew of online sites such as Domain.com, iPage and HostGator.com. Formerly BizLand, the company is headquartered in Massachusetts. It manages over 2.9 million customers and 10 million domains across the globe.
An MBA from Wharton Business School in the US, Ravichandran is currently president and CEO at Endurance. Prior to taking up the top role, he was executive vice president. Earlier, he was CTO at the company. Ravichandran is a charter member of The Indus Entrepreneurs (TiE) and managing partner of GT Charitable Trust Foundation.
In November 2011, Endurance's earlier investor and technology-focused PE firm, Accel-KKR had sold its majority shares to Warburg Pincus and Goldman Sachs Capital Partners, which valued the company at $1 billion then.
(Edited by Joby Puthuparampil Johnson)