This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Internap Expands Into Small Businesses

Stocks in this article: INAP RAX

NEW YORK (TheStreet) Internap Network Services (INAP) CEO Eric Cooney said that the $145 million acquisition of Canadian data center and hosting outfit iWeb Group would allow the buyer to serve customers "from early stage through maturity," in a Thursday, Oct. 31 conference call.

Monteal-based iWeb serves 10,000 small and mid-sized businesses, while corporations and other large enterprises make up Atlanta-based Internap's clientele. 

In addition to gaining a foothold in the market for smaller business customers, Cooney said, Internap would benefit from iWeb's ecommerce systems.

The buyer announced the purchase of iWeb from Novacap Investments Inc., Caisse de depot et placement du Quebec, BCSP IW Holdings LLC, Telebrome Inc., Fondaction CSN and founders Eric Chouinard and Martin Leclair after the market close on Wednesday.

The target produces $11 million in Ebitda, from $44 million in sales. Half of iWeb's revenues come from outside North America.

Shares of Internap rose 15 cents, or more than 2%, to $7.26 on Thursday.

Wells Fargo Securities LLC analyst Gray Powell called the price "reasonable," in a Thursday report. 

The price comes to 13.2 times iWeb's EBITDA for the prior year. 

Rival company Rackspace Hosting (RAX) trades at 12.7 times EBITDA , Powell wrote, and Internap's own valuation multiple is about 11 times Ebitda. 

The iWeb valuation is also cheaper than Interap's January 2012 purchase of Seaport Capital LLC-backed cloud services provider Voxel Holdings Inc. for $33.3 million, which Powell gauged to be 17.5 times Ebitda for the trailing year.

Powell noted that iWeb's 25% Ebitda margin exceeds Internap's 20% margin.

Cooney said that Internap "perhaps had a running start" in the auction, because iWeb is a customer. The target uses the buyer's Ubersmith data center and infrastructure automation, billing and support software, which Internap picked up in the Voxel acquisition. 

Jefferies Finance and PNC Bank provided commitments for a $350 million secured credit facility that Internap will use to fund the purchase and refinance its debts.

Internap CFO Kevin Dotts said the company expects the interest rate somewhere in the libor plus low 4 range," during the Thursday call. The financing package will include a $300 million term B loan and a $50 million revolver.

The buyer expects leverage will come to about 4.4 times Ebitda for the prior 12 months. 

Novacap led the buyout of iWeb in 2011 that valued the company's equity at C$47 million ($45 million).

Richard Lukaj, James Henry and Steve Lee led a team from The Bank Street Group that advised iWeb.

Internap retained Jefferies bankers Mohit Pande and Charles Stocks.

The parties expect to close the deal in December.

--Written by Chris Nolter in New York

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,922.00 +117.20 0.66%
S&P 500 2,074.48 +3.83 0.18%
NASDAQ 4,774.5290 +9.1490 0.19%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs