Interland Sells Dedicated Server Business to Peer 1

Interland has announced this week that it has sold its dedicated server business to Peer 1 Networks, which acquired Server Beach last year. Mirus Securities, Inc. represented Interland in the transaction, which included $14 million in cash for Interland’s data centers in Atlanta, Miami, and Fremont, Calif.

Peer 1 president and CEO Geoffrey Hampson called the deal an “outstanding fit” and promised little immediate change for Interland customers. “This transaction adds a large customer base, skilled staff, solid dedicated server equipment, and three data centers to Peer 1 Network’s existing infrastructure,” Hampson noted.

“The dedicated server market has been the hottest segment of the web hosting industry over the past two years, as discount pricing allowed hosting resellers and web entrepreneurs to run their own server for less than $100 a month” said Jamie Grant, a partner at Mirus familiar with the deal. “The popularity of discount dedicated servers spurred huge growth for providers such as EV1Servers.net and The Planet. But dedicated hosting is more capital-intensive than other types of hosting, as providers must lay out cash to purchase hardware and licenses for each server.”

About half of Interland’s dedicated servers run on Microsoft software, with the remainder on open source operating systems. Interland noted that the sale allows it to realize “significant savings,” including costs related to the ongoing purchase of dedicated servers and bandwidth, and the cost of operating the three data centers, which are staffed by 139 employees.

Peer 1 noted that the company is borrowing $28 million to fund the deal and repay some of its debt, and issuing $7 million in preferred stock. Private equity fund Celerity Partners is buying $4 million of the preferred shares, with company insiders buying the remainder. Peer 1 is headquartered in Vancouver, Canada, and its shares are traded on Toronto’s TSX Venture Exchange. The company has 12 data centers and an IP network that spans much of North America. Last October it purchased ServerBeach for $7.5 million.

About Mirus Securities

Mirus Securities, Inc. (member FINRA, SIPC) provides investment banking solutions to middle market corporations in targeted technology, manufacturing, and service industries. The firm’s services include merger advisory, private equity raising, and valuation services for entrepreneurs, corporations and professional financial investors. Additional information about the firm is available at  www.merger.com.