IT hosting and managed services company Iomart (IOM:AIM) is in talks to buy German managed hosting company PlusServer. The target is reportedly an unwanted part of the Host Europe business acquired by US websites business GoDaddy earlier this year.

The move has surprised investors but left some market experts sceptical. Securing the takeover of PlusServer would be a significant departure for the UK company in terms of target scale. According to analysts, PlusServer made $92m (£72m) revenue and $42m (£33m) earnings before interest, tax, depreciation and amortisation versus the £89.6m and £36.6m reported by Iomart for the year to 31 March 2017. A takeover would likely cost in excess of £400m, versus Iomart’s current £360m enterprise value.

Iomart’s largest acquisition to date was BackUp Technology in October 2013 for £21.5m. Buying PlusServer would require a large equity fund raise, in our opinion.

A deal would also fly in the face of industry observations ‘that there is enough opportunity in the UK for both organic and acquisition growth without having to take the risk of new geographic markets,’ says Philip Carse of IT consultant Megabuyte.

Negotiations remain at an early stage and no guarantees are offered, but a PlusServer acquisition by Iomart would be ironic. PlusServer’s former parent Host Europe attempted to purchase Iomart three years ago, making offers of 275p and then 285p per share. Both were swiftly rebuffed by Iomart management. (SF)

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