100% for R22 – Company Acquires Minority Stake in the Hosting Segment

Warsaw-listed R22 has signed an agreement with TCEE Fund III to acquire the fund’s 28.5% stake in H88 S.A. – the entity operating the Group’s hosting and domain business. The transaction, valued at approximately EUR 13.6 million (PLN 58.6 million), will make R22 the sole owner of H88. The transaction will be financed through a combination of own funds and bank debt.

Between 2016 and 2018, backed by funding from 3TS Capital Partners (via TCEE Fund III), the proceeds from R22’s Warsaw Stock Exchange IPO and bank financing, the Group carried out a consolidation of the Polish hosting and domain market. During this period, brands including Domeny.pl, Linuxpl.com and Kei.pl joined the Group. These transactions significantly strengthened R22’s position in Poland, bringing it into the top 3 largest market players. In 2018, the Group launched its international expansion and began building a leadership position in Central and Eastern Europe.

Over the past three years, R22’s hosting segment has grown at a very rapid pace. In 2015, the segment generated PLN 8 million in annual revenue and PLN 2.5 million in EBITDA; in Q2 2018/2019 alone, it delivered PLN 17 million in revenue and PLN 5.3 million in adjusted EBITDA – representing more than an 8-fold increase in both metrics.

– Acquiring the 3TS stake is the best investment we can imagine. At an attractive valuation, we are buying into the most dynamically growing entity in the Polish hosting market – one we know extremely well – while simultaneously freeing ourselves from restrictions stemming from the investment agreement with the fund, which significantly increases our operational flexibility. Simply put, we are regaining full control of the company. Following an intensive period of acquisitions in Poland, we are continuously growing revenue and improving the efficiency of the segment while expanding abroad. Claiming the leadership position in the Romanian hosting and domain market was our first step in international development. This year we intend to enter another market, and within two years we aim to at least double the size of the business and become the regional leader in the CEE area. – comments Jakub Dwernicki.

Under the signed agreement, R22 will acquire 28.5% of H88 S.A. shares in two tranches for a total consideration of approximately EUR 13.6 million. The transaction will be financed through bank debt.

– We are in a sound financial position that allows us to take on additional leverage. At the end of 2018, the R22 Group’s senior net debt-to-EBITDA ratio stood at 1.6x. The minority stake buyout does not change our plans or our ability to secure bank financing for expansion into further regional markets. We also reaffirm our intention to carry out a share buyback and to pay a dividend from the 2018/2019 profit. – adds Jakub Dwernicki.

The partnership between R22 and 3TS enabled the dynamic consolidation of the Polish hosting and domain market, financed through a combination of bank debt and proceeds from the pre-IPO public offering on the WSE.

– Congratulations to the CEO and the team, who since September 2016, when we became a shareholder in H88, have executed 9 acquisitions with remarkable effectiveness and capital efficiency, building a major player in its segment. We achieved a return of over 2x on this investment, with an internal rate of return (IRR) of approximately 30% per annum. – comments Zbigniew Łapiński of 3TS Capital Partners, manager of TCEE Fund III.