Endurance International buys Constant Contact for $1.1 billion

Employees at work in the InnoLoft space of Constant Contact in Waltham.
Employees at work in the InnoLoft space of Constant Contact in Waltham.

Two publicly traded Massachusetts companies that sell technology services to small businesses are joining forces.

Endurance International Group Holdings Inc., which sells a range of Internet hosting and website products, announced Monday that it’s spending about $1.1 billion to buy e-mail marketing provider Constant Contact Inc.

The purchase price is 23 percent higher than Waltham-based Constant Contact’s closing stock price of $26.10 on Oct. 30. The two companies said their boards of directors had already approved the deal.

Burlington-based Endurance International said it expects to pay for the acquisition with borrowed money, which will be paid in cash to Constant Contact shareholders.

It’s a significant amount of debt for Endurance International, which has a market capitalization of about $1.8 billion. Endurance had sales of about $652 million last year, compared with Constant Contact’s revenue of about $332 million.

Endurance’s shares finished the day at $11.12, down more than 16 percent. Constant Contact shares jumped to $31.83, an increase of nearly 22 percent.

Constant Contact’s employees will join Endurance International, and its services will join the parent company’s long list of separately marketed products, which include website hosting service HostGator and blogging software Typepad.

“Constant Contact will continue to operate as its own distinct brand,” Endurance International chief executive Hari Ravichandran said.

“We’ll become their largest business instantly,” Constant Contact chief executive Gail Goodman said. “We’re looking to create a small business powerhouse — take businesses from their moment of inception into growth, marketing, advertising, and success.”

The transaction should bring “at least $25 million” in savings during the company’s next fiscal year, Ravichandran said.

Goodman said there would be “some cuts, but not dramatic” changes as a result of the deal, with notable savings in marketing and administration. Constant Contact will stay in its Waltham headquarters, she said.

Endurance International has about 2,500 employees, while Constant Contact has about 1,400.

The two companies were business partners before the acquisition. Endurance International is responsible for about 5 percent of Constant Contact’s new customers under a marketing deal that began earlier this year, the companies said.

By combining, Endurance International and Constant Contact could bolster their competitive position in an online marketing sector that has seen renewed interest from startup entrepreneurs and large tech companies in recent years.

One key example in the Boston area is HubSpot, a Cambridge-based online marketing company that went public in 2014. HubSpot offers several services that compete with both Endurance and Constant Contact, including website building tools and e-mail marketing software.

Endurance, founded in 1997, raised $252 million through its IPO in 2013. Constant Contact, founded in 1998, has been public since 2007.

Goodman said she plans to stay on board for up to a year as the companies combine their operations, but will likely step down once the merger is complete.

“I’m going to help settle the team and then see what’s next,” Goodman said. “I’ve had a very good run.”

Endurance International Group Constant Contact
Year founded 1997 1998
Ticker EIGI CTCT
Market cap $1.8 billion $831 million
Stock price $13.33 $26.10
2014 revenue $651.9 million $331.7 million
CEO Hari Ravichandran Gail Goodman
Headquarters Burlington Waltham
Employees 2,503 1,400

 

Globe correspondent Scott Kirsner contributed to this story.

Updated 5:38 pm with closing stock prices.