July 10, 2015 / 6:18 AM / 2 years ago

United Internet eyes IPO of division to fund buys

FRANKFURT (Reuters) - Germany's United Internet AG said it may float its business offering web-hosting and other online services to corporate customers to fund an acquisition drive, positively surprising investors on Friday.

The announcement pushed shares in United Internet as much as 6 percent higher in early trade, as it raised prospects of a growth drive by the Internet service provider.

"The web-hosting spin-off is great news," Commerzbank analyst Heike Pauls said.

"First it will draw attention to low implied valuation of web-hosting assets. Second, it will provide a 'cleaner' acquisition currency for additional web-hosting takeovers," she added, sticking with her "buy" recommendation on the stock.

By 0820 GMT, shares in United Internet were trading 5.8 percent higher at 41.78 euros.

United Internet has been investing in consumer Internet and technology businesses, buying stakes in companies like venture capital group Rocket Internet and cable group Versatel.

It has also taken over web-hosting groups like InterNetX, Sedo and fasthosts in recent years.

Underlining its appetite for further takeovers, it also announced on Friday that it agreed to buy Polish web-hosting firm home.pl from investors led by private equity fund V4C Eastern Europe for 135 million euros ($150 million) in cash.

Some analysts said the takeover was not cheap, with United Internet paying 15.5 times estimated 2015 operating profit, but found that home.pl was a good strategic fit offering growth prospects that should make it worth its money.

If United Internet decides to go ahead with an initial public offering (IPO) of the Business Applications division, it would launch the flotation in about two years, the company said.

It said it expects the division to generate about 600 million euros of sales this year. By comparison, it sees group sales reaching around 3.7 billion euros.

Reporting by Maria Sheahan; Editing by Gopakumar Warrier and Georgina Prodhan

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