Gores to Buy Web Hosting Company

Los Angeles private investment firm Gores Technology Group said Monday that it had agreed to buy an unprofitable U.S.-based Web hosting and networking firm owned by Britain’s Cable & Wireless for $125 million.

Gores, which recently raised $400 million for a buyout fund, would be putting some of that money to work in the acquisition of the unit, which is based in Reston, Va. Of the purchase price, Gores would pay $50 million in cash and the rest in debt.

London-based Cable & Wireless, which spent nearly $3 billion on acquisitions in the late 1990s to assemble the U.S. unit, put the business into Chapter 11 bankruptcy protection Monday as part of the deal. The sale, which requires U.S. Bankruptcy Court and regulatory approval, could be completed by mid- February, according to Gores.

The L.A. firm, whose portfolio includes 15 tech and telecom businesses, was launched in 1987 by entrepreneur Alec E. Gores. It often buys unprofitable pieces of large firms, such as Learning Co. from Mattel Inc. and VeriFone from Hewlett-Packard Co., and tries to turn them around.

“We’re excited about the opportunity to buy a business with such high-quality customers,” said Gores Managing Director Scott Honour, noting that Cable & Wireless’ U.S. clientele included Microsoft Corp., Yahoo Inc. and Citigroup Inc. “The company has been going through a restructuring, and we think we’re uniquely qualified to complete the job and improve the performance.”

Alec Gores is the brother and friendly rival of Tom Gores, whose L.A.-based firm, Platinum Equity, recently agreed to buy the logistics unit of London-based Hays for $174 million.