Why Web.com Group, Inc. Stock Jumped Thursday

What happened

Online marketing solutions company Web.com (NASDAQ: WEB) saw its stock jump as much as 12.1% on Thursday. The stock finished the trading day up 11.4%.

That gain followed an announcement Thursday morning from Web.com that it entered an agreement to be acquired by an affiliate of private equity firm Siris Capital Group in an all-cash deal. With the deal valued at about $2 billion, or $25 per share, the acquisition represents approximately an 8% premium compared to Web.com’s closing price on Wednesday.

Image source: Getty Images.

So what

Though the premium Siris is offering to acquire Web.com may seem small, it was only a few months ago when shares were trading closer to $18. Web.com has been on the rise in June after an activist investor disclosed 9.4% ownership in the company.

The acquisition comes at a time when Web.com’s revenue growth has slowed. Web.com’s first-quarter revenue was up just 0.8% year over year in the company’s most recent quarter.

“This transaction will provide shareholders with immediate and substantial cash value, while also providing us with a partner that shares in our commitment to customers and employees and can add strategic and operational value,” said Web.com CEO David Brown in a press release about the deal. In addition, Brown said “Siris’ support will enable Web.com to execute on its strategy and next phase of growth.”

Now what

While this acquisition is expected to close in the fourth quarter of 2018, the deal includes a “go-shop” period that allows Web.com to solicit other buyout offers. Web.com can solicit offers until Aug. 5. If a higher offer is made, Siris will be able to make a revised offer.

If it is acquired, Web.com will become a private company.

10 stocks we like better than Web.com Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Web.com Group wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

You May Also Like

About the Author: Over 50 Finance