November 8, 2011 / 2:51 AM / in 8 years

UPDATE 1-Warburg, Goldman buy IT firm from Accel-KKR

* Deal values Endurance at $1 billion-source

* New owners bet on high-growth for cloud services

Nov 7 (Reuters) - Warburg Pincus LLC and Goldman Sachs said on Monday they would buy a majority stake in a hosting and online services firm from private equity outfit Accel-KKR, seeking to tap growth in the cloud services market.

Terms of the deal were not disclosed but a person familiar with the matter said the firm, Endurance International Group, would change hands for about $1 billion, or 7.5 times forward earnings before interest, tax, depreciation and amortization.

Accel-KKR bought its majority stake in Endurance in October 2008, leaving the company’s senior management team with a stake in the company. Under the new deal, Endurance’s management and Accel-KKR will continue to hold an interest.

Warburg Pincus’s stake in Endurance will be more than 50 percent, the person familiar with the matter said. Credit Suisse arranged $350 million in first-lien debt for the deal, the person added.

Founded in 1997, Endurance offers web hosting accounts to over 1.9 million customers, managing more than 7.7 million domains and delivering over 5 million applications through its proprietary cloud-based platform.

Looking for cheaper alternatives to run their businesses, many small- and medium-sized firms are migrating to hosting their applications on the cloud. These applications run on servers and hardware provided by companies like Endurance.

The popularity of such services makes Endurance a growth rather than a cost play for Warburg Pincus and GS Capital Partners, Goldman Sachs’s private equity arm, said the person familiar with the matter.

Credit Suisse Group and Cleary Gottlieb Steen & Hamilton LLP advised Warburg Pincus on the deal, while Morgan Stanley and Kirkland & Ellis LLP advised Endurance and Accel-KKR.

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