Web.com acquires Network Solutions for $405M plus stock

Web.com is buying Network Solutions, a domain registration company dating back to the 1970s and the origins of the Internet.

The terms of the deal include $405 million in cash plus 18 million shares of Web.com stock.

At current share prices, that puts the total value of the deal at $560.8 million. Web.com, a publicly traded company focusing on website-building and online marketing tools for small and medium-size businesses, will also be taking on Network Solutions’ existing debt.

Network Solutions CEO Tim Kelly spoke to VentureBeat today, saying that the companies would operate jointly after the deal closes, which would bring the combined entities to greater scale and help them compete against powerful relative newcomers such as GoDaddy.

“We realized there was a huge opportunity to put the companies together to create scale as more and more small businesses are getting online,” said Kelly. “Those adoption curves are increasing dramatically, and by putting our companies together, we can increase our competitiveness.”

Network Solutions CEO Tim Kelly

The deal is expected to close in the fall. At that time, current Network Solutions shareholders will own around 37 percent of Web.com. The combined companies will serve around 3 million customers, manage in excess of 9 million domains and employ close to 2,000 professionals around the world.

With specific regard to GoDaddy, the current leading registrar that controls around 45 million domains, Kelly said, “We will have an abiity to recreate our brand with a higher degree of marketing support; that’s one of the reasons we’re so excited about this opportunity.”

As far as regulatory approval is concerned, “We’re obviously prepared to go through all the regulartory procedures, but we’re not expecting anything out of the ordinary,” Kelly said.

In a statement, Web.com and Network Solutions said they expected to be on track for $450 million in pro forma, combined, non-GAAP revenues for 2011. The companies also say the specific market they’re targeting — web services for SMBs — is a $19 billion market.

One month ago, GoDaddy — the company to beat in domain registration — was acquired by private equity firms for $2.25 billion. GoDaddy CEO Bob Parsons said at the time the registrar planned to use the cash infusion to expand internationally, grow its partnerships, make some acquisitions and hire more talent.

With large amounts of cash and marketing power behind both Network Solutions and GoDaddy, it will be interesting to watch the battle of the domain registrars as it continues.