Web.com shares soar after it buys larger rival
12:44 p.m. EDT, August 4, 2011
(Reuters) - Shares of Web.com Group Inc surged 35 percent on Thursday, as investors cheered the e-commerce company's move to buy its largest competitor, cementing its leading position in the online services market for small businesses.
Web.com's $560 million cash-and-stock take over of privately held Network Solutions also set aside fears of slowing organic growth.
The company, which provides web design, email, marketing and advertising services to local businesses, will more than double its revenue base with the deal.
Web.com had done a great job with the Register.com acquisition and is now acquiring a much bigger company, allowing for better cost savings and increased scale, B Riley analyst Sameet Sinha said in a note to clients.
The company said purchasing Network Solutions, backed by private equity firm General Atlantic, would triple its customer base to about 3 million subscribers.
On Wednesday, the company also reported second-quarter results that topped estimates helped by a 73 percent surge in its subscription revenue.
The company gained over a $100 million in market value on Thursday, with almost 5 times the normal daily volumes of shares changing hands. Its shares were up 32 percent at $11.42 in afternoon trading.