Web.com Group Inc, a U.S. provider of internet domain name registration that also helps businesses build websites, is in talks with private equity firms after receiving takeover approaches, people familiar with the matter said on Thursday.
The buyout interest in Web.com comes as its sector has become increasingly crowded, with companies such as Wix.com Ltd, Weebly Inc and Squarespace seeking to gain market share from established players such as GoDaddy Inc.
Web.com has engaged in early-stage talks with private equity firms in response to approaches about a potential leveraged buyout, the sources said. The company is not actively soliciting offers and there is no certainty that any deal will occur, the sources added.
The sources asked not to be identified because the deliberations are confidential. Web.com, which has a market capitalization of $1.1 billion, declined to comment.
Based in Jacksonville, Florida, Web.com generated $710.5 million in revenue in 2016, compared to $543.5 million the year before. It reported adjusted earnings before interest, tax, depreciation and amortization in 2016 of $179.5 million, up from $155.8 million the year before.
Web.com has been trying to expand into new areas, buying local marketing services firm Yodle last year for more than $300 million.
Web.com's top shareholder is New York-based hedge fund Okumus Fund Management, which owned 18.64 percent of the company as of March 31. In 2015, the company reached an agreement with Okumus to add two independent directors to its board.
The market for web services to small and medium size businesses remains fiercely competitive, as low barriers to entry and downward pressure on prices have weighed on the profitability of many companies in this space.
One of Web.com's rivals, GoDaddy, has been pursuing acquisitions following its initial public offering in 2015. Private equity firms KKR & Co LP and Silver Lake Partners LP had acquired GoDaddy in 2011 for $2.25 billion before taking it public.
Last year, GoDaddy spent $1.82 billion on buying Host Europe, a company that provides similar web services, in a bid to fuel its international expansion.
(Reporting by Liana B. Baker in San Francisco and Greg Roumeliotis in New York; Editing by Phil Berlowitz)