Mercapital puts auction woes behind it

The Spanish buyout firm has teamed with The Carlyle Group to buy web hosting firm Arsys for €160m – in the process avoiding the kind of competitive auction that proved unproductive for the firm this year.

Mercapital and The Carlyle Group have acquired a 79 percent stake in Arsys, the Spanish provider of web hosting and domain registration services, for €160 million ($230 million). The two managers have taken 39.5 percent each.

The deal is the first completed by Mercapital since it closed its latest fund on €550 million in January this year. David Estefanell, a partner at Mercapital who led the Arsys deal, said that since the fund closed “we have been involved in a lot of auctions but have never reached the price demanded by the seller”.

Estefanell added that the possibility of an auction for Arsys was headed off when Mercapital and Washington DC-based Carlyle realised they were both in contact with the company’s management with a view to a deal. At that point, they opted to team up and submit a joint bid.

The deal was supported by an undisclosed amount of debt finance from Barclays and Commerzbank. Estefanell said securing support from banks was not difficult, but the terms upon which the debt was offered were more stringent in some respects than they had been before the credit crunch.

Founded in 1996 by two entrepreneurs, Luis Ignacio Cacho and Nicolas Iglesias, Arsys has become the largest web hosting and domain registration firm in Spain with 550,000 domains, 170,000 clients and 250 employees. The business says it expects to generate revenues in excess of €40 million in 2007.

Estefanell said there was scope to continue growing the firm organically in its existing markets of Spain, Portugal and France, while also “diversifying the portfolio a little into more value-added products”.