Online services provider Endurance International agreed Monday to buy software maker Constant Contact for $1.1 billion in an effort to expand its offerings for small businesses.
The deal will add Constant Contact’s online marketing tools such as email marketing, events management and social media integration to Endurance’s portfolio of Web-hosting software for small and medium-sized businesses, Reuters said.
“We know that once small businesses have a web presence, they look for other products and services that will help them to grow their business,” Endurance CEO Hari Ravichandran said in a news release. With the deal, “we see an opportunity to help our growing subscriber base meet their goals through an integrated suite of solutions, and we are excited to add this talented team to our roster.”
At $32 per share, Endurance’s offer represents a premium of about 23% over Constant Contact’s Oct. 30 closing price. The announcement of the deal surprised investors, sending Endurance’s stock down as much as 23%.
“I think the market will start to understand it a little bit better, but there’s definitely a knee-jerk reaction,” Ravichandran told Reuters. “The unknown always causes anxiety to public investors.”
Constant Contact closed Monday up nearly 22%, at $31.83, its largest gain since April 2014.
Endurance’s products include website hosting service HostGator and blogging software Typepad. The acquisition would increase its subscriber base to more than five million and result in fiscal 2015 revenue on a pro forma adjusted basis of $1.1 billion, the companies said.
“We’ll become their largest business instantly,” Constant Contact chief executive Gail Goodman said. “We’re looking to create a small business powerhouse — take businesses from their moment of inception into growth, marketing, advertising, and success.”
The Boston Globe said the deal could bolster the companies’ competitive position in an online marketing sector that has seen renewed interest from startup entrepreneurs and large tech companies in recent years.
But Cowen analyst Gregg Moskowitz said in a research note that the revenue synergies of the deal look limited and questioned how many of Endurance’s small business customers will be willing to pay for Constant Contact’s solutions.