October 5, 2004 – ( TheHostingNews.com ) Peer 1 Network Enterprises, Inc (TSX-V:PIX), a leading provider of high performance Internet bandwidth and server co-location facilities, announced today that its 100% owned subsidiary, P1 Acquisition, Ltd. (“P1”) has signed a Definitive Agreement to acquire all of the operating assets of San Antonio, Texas-based ServerBeach, Ltd, a leader in the unmanaged dedicated server business.
P1 has agreed to purchase all of ServerBeach’s assets, contracts and business, including a data center located in San Antonio, Texas and over 4,200 dedicated servers. The net effect of this highly accretive acquisition will be to increase Peer 1’s monthly recurring revenue by 57% to over $CDN 2 million. Management expects the two businesses to be quickly integrated, without major cost. The ServerBeach business will be operated as a wholly owned subsidiary of Peer 1. The staff and management of ServerBeach will be offered employment at P1.
The purchase price is comprised of $US 7.5 million in cash, a management services contract , and other bandwidth services. After integration costs and savings, the acquisition of ServerBeach is expected to add over $CDN 5 Million incremental EBITDA in the year ending June 2006, the first full year of operations as an integrated company. Peer 1 has arranged Bridge Financing for the cash portion of the purchase price from a Company related to one of its Directors on commercially reasonable terms and due on December 31, 2005 with certain renewal provisions thereafter. The loan carries an interest rate of 6% per annum through December 31, 2005 and thereafter at 15% per annum.
Final terms are subject to regulatory approval, and final closing is expected to take place within 15 days.
“The highly accretive acquisition of ServerBeach is a realization of Peer 1 management’s strategy of accelerated growth through acquisitions,” said Geoffrey Hampson, Peer 1 Network’s President and CEO. “Peer 1 has been seeking acquisitions that increase the footprint of the Peer 1 network, that increase the co-location capacity, and that offer a wider range of choices to Peer 1 customers. Because we are leveraging our existing co-location and network infrastructure, there will be very little incremental cost associated with the future growth of this new business.”
P1 will retain ServerBeach operations in San Antonio, Texas. “We are very pleased to be able to integrate ServerBeach’s proven team of very experienced and capable people who have rapidly built a major player in this fast growing sector,” said Rick Hingson, Peer 1’s Vice President of Operations. “The dedicated server business is a natural extension of the infrastructure that Peer 1 already provides and we see many opportunities to leverage existing customer relations within both companies. Peer 1’s culture of devotion to the customer and focus on our core business has gained us an excellent and unparalleled reputation that will mesh very well with the culture and management style of ServerBeach. This acquisition represents a great way for Peer 1 to continue to grow geographically, in product offering and financially.”
Peer 1 Network was established in 1999 in Vancouver, BC in response to a demand in the market for high-performance Internet bandwidth and quality data center infrastructure. The company began to grow when the rest of the market was contracting which allowed Peer 1 to adopt a strategy based on acquiring infrastructure at a fraction of the actual cost and of being able to offer an industry leading 100% network uptime guarantee. Peer 1 has grown organically into one of North America’s leading players in the IP network marketplace. Peer 1’s acquisition of ServerBeach is a first step in management’s plan to continue to grow both organically and through acquiring growth companies with a history of positive and growing EBITDA.
ServerBeach was launched in response to a real need exhibited in the marketplace for unmanaged dedicated servers. By listening to the customers and developing new applications to serve their ever-changing needs, ServerBeach has become a leading dedicated server provider. ServerBeach has developed internal automation products that help to speed up provisioning, billing and tracking and give the customer unprecedented control of their servers and applications. These systems will be implemented through Peer 1 and form a key strategic element for future growth and differentiation.
In many respects ServerBeach and Peer 1 Network share complementary business models. “Both companies have developed products in response to the needs of tech-savvy businesses and individuals that require high quality performance, but want to manage their own applications and hardware,” said Mark Teolis, Peer 1’s Chief Technology Officer. “That’s what makes this acquisition a great fit. Peer 1’s management is dedicated to ensuring that ServerBeach is as well-equipped as Peer 1 to deliver the quality and service its customers demand. ServerBeach customers will soon become acquainted with Peer 1’s high-performance network and customer service as we move our network into the ServerBeach facilities and dedicate more resources to client support.”
“The fit between the ServerBeach and Peer 1 product families is outstanding,” said Richard Yoo, ServerBeach’s founder. “With Peer 1’s and ServerBeach’s corporate cultures being so closely aligned, the combination will be a win for the ServerBeach team and their customers. Peer 1 is acquiring a great company that will contribute to producing a strong market force in the dedicated server, co-location and bandwidth markets.”