LONDON: Minds + Machines Group Limited (MMX) has conditionally agreed to sell the majority of the company’s assets and transfer its rights and obligations under contracts and/or government approvals relevant for the operation of the assets to Registry Services LLC (GoDaddy Registry), an affiliate of GoDaddy Inc., for US$120 million in cash.
The Consideration is subject to adjustment based on the working capital of the subsidiaries acquired and any customer deposits held by the Company as at the date of completion.
· strong strategic rationale to sell to a large, established player in the industry;
· recommended by the Board; and
· irrevocable undertakings received which together represent approximately 64 per cent. of the current issued ordinary share capital of the Company, confirming that they shall vote in favour of the Resolution being proposed at the General Meeting.
· The gross Consideration payable by GoDaddy Registry represents an implied value of approximately 10 pence per Ordinary Share (based on an exchange rate of GBP:USD / 1:1.387.
· After payment of estimated transaction costs (including estimated taxes payable by the Company), this represents an estimated net asset value (at the Exchange Rate) of 8.8 pence per Ordinary Share.
· The Estimated Offer Value Per Share includes the value of residual net assets of the Company including distributable cash held by the Company as at 6 April 2021 of approximately US$8,200,000 generated from its current trading activities.
The Company has undertaken preliminary tax analysis in relation to the proposed asset sale based on its expectations regarding allocation of the Consideration between the Assets and the estimate of Transaction Costs is subject to change.
The Estimated Offer Value Per Share represents a premium of:
· 92% to the market capitalization of the Company based on the closing share price of Ordinary Shares on AIM on 6 April 2021;
· 87% to the 20-day volume weighted average price (VWAP) of an Ordinary Share up to and including 6 April 2021; and
· 78% to the 60-day VWAP of an Ordinary Share up to and including 6 April 2021.
Principal reasons for sale
Following the Company’s leadership changes in October 2020, Mr. Tony Farrow (the Company’s Chief Executive Officer) and Mr. Bryan Disher (the Company’s Chief Financial Officer) conducted a thorough review of the underlying profitability of the business and the contribution of each TLD asset.
As set out in the trading statement in January 2021, the initial conclusions reinforced the view of the Board that the business has strong recurring cash flows but expects limited opportunity for material organic growth beyond the Company’s AdultBlock services without fundamental changes.
Consequently, the Company needs to consider a multi-year transformation of the Company, further inorganic growth and/or pursuing additional revenue opportunities outside the core business in order to effectively leverage its relatively high fixed costs, or seek a merger or sale of the business.
Tony Farrow, CEO of MMX, commented: “The Board has continually sought to grow the business both organically and via acquisition to maximise the inherent operational gearing of its fixed overheads, but without significant capital investments, we expect our growth to be in-line with the TLD industry generally. The organic growth of the Company is likely to remain in low single digit percentages for the foreseeable future. The risks of identifying and concluding further acquisitions together with the expansion into unproven revenue streams need to be considered against participating in the ongoing consolidation in the TLD industry.
“The Board was able to consider the approach from GoDaddy Registry as part of its broader strategic review and following a period of robust negotiation and extensive due diligence the Board is pleased to announce and recommend the proposed Sale for a total consideration of $120 million in cash.”
For the period from the Completion Date until no later than 31 January 2022 the Company will provide certain transition services to GoDaddy Registry.
The Transition Services are provided by the Company to ensure a smooth transition of the Assets and employees to GoDaddy Registry. The Company will be paid fixed fees by GoDaddy Registry to cover the costs incurred by the Company in providing the Transition Services, including the costs of relevant employees. The Transition Services consist of:
(a) maintenance of technology infrastructure and Registry platforms;
(b) customer support to Registrars;
(c) back-office support services (including billing, cash-collection and accounting);
(d) legal support; and
(e) channel sales and marketing support.
The Transition Services Period may be terminated or extended by written agreement between the Company and GoDaddy Registry.
The Company expects that during the Transition Services Period it will seek to dispose of or otherwise discontinue operating the retained assets of the Group and wind-up dormant subsidiaries.
The Board considers the terms of the Sale to be fair and reasonable and that the Resolution to be proposed at the General Meeting of Shareholders called to consider and if thought fit approve the Sale (as further detailed below), is in the best interests of the Company and the Shareholders as a whole.
Accordingly, the Board recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as they intend to do in respect of their own beneficial holdings of 22,000,000 Ordinary Shares in aggregate, representing approximately 2.5 per cent. of the current issued share capital of the Company.
The Company has received signed irrevocable undertakings from certain Shareholders holding, in aggregate, 561,327,371 Ordinary Shares as at 7 April 2021 and which together represent approximately 64 per cent. of the current issued ordinary share capital of the Company, confirming that they shall vote in favour of the Resolution being proposed at the General Meeting.
On the basis of the signed irrevocable undertakings from Shareholders, it is likely that the Resolution put to the General Meeting will be approved.