(Sharecast News) - Top-level internet domain registry company Minds + Machines has conditionally agreed to sell the majority of its assets, it announced on Thursday, and transfer its rights and obligations under contracts and government approvals, to GoDaddy affiliate Registry Services, for $120m (£87.23m) in cash.
The AIM-traded firm said the consideration would be 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.
Following the company's leadership changes in October, chief executive officer Tony Farrow and chief financial officer Bryan Disher conducted a review of the underlying profitability of the business, and the contribution of each top-level domain (TLD) asset.
As it set out in its trading statement in January, the initial conclusions of the review were that the business had "strong" recurring cash flows, but expected limited opportunity for material organic growth beyond its 'AdultBlock' services, without fundamental changes.
Minds + Machines said that as a result, it needed to consider a "multi-year transformation" of the company, further inorganic growth, or pursuing additional revenue opportunities outside the core business in order to leverage its relatively high fixed costs, or seek a merger or sale of the business.
The board said that as a result there was a "strong strategic rationale" to sell to a large, established player in the industry, and as a result it was recommending the sale.
Irrevocable undertakings had been received, representing 64% of its current issued ordinary share capital, confirming that they would vote in favour of the resolution being proposed at a general meeting.
It said the gross consideration payable by GoDaddy Registry represented an implied value of 10p per share, and after the payment of estimated transaction costs, including taxes, it represented an estimated net asset value of 8.8p per share.
The estimated offer value per share represented a premium of 92% to its market capitalisation, based on its closing share price on 6 April, and 87% to the 20-day volume weighted average price up to and including 6 April.
"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," said CEO Tony Farrow.
"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."
At 1313 BST, shares in Minds + Machines Group were up 58.7% at 7.3p.
22 Feb 2016 08:04