TIDMMMX
RNS Number : 7553U
Minds + Machines Group Limited
08 April 2021
Minds + Machines Group Limited
("MMX", the "Company" or "Group")
Proposed Sale of Assets to Registry Services, LLC (an affiliate
of GoDaddy Inc.)
and
Notice of General Meeting
Minds + Machines Group Limited (AIM:MMX), the top-level domain
registry company, announces that it has conditionally agreed to
sell the majority of the Company's assets (as set out below) and
transfer its rights and obligations under contracts and/or
government approvals (including national, regional or city
partnership agreements) relevant for the operation of the assets
(together, the "Assets") to Registry Services, LLC ("GoDaddy
Registry"), an affiliate of GoDaddy Inc., for US$120 million in
cash (the "Consideration"). 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 (the "Completion Date").
Highlights
-- 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 Consideration
-- 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 (the "Exchange Rate").
-- After payment of estimated transaction costs (including
estimated taxes payable by the Company) ("Transaction Costs"), this
represents an estimated net asset value (at the Exchange Rate) of
8.8 pence per
Ordinary Share (the "Estimated Offer Value Per 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
("Available Cash").
The Company has undertaken preliminary tax analysis in relation
to the proposed asset sale (the "Sale") based on its expectations
regarding allocation of the Consideration between the Assets and
the estimate of Transaction Costs is subject to change.
Attractive valuation
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."
Transition Services
For the period from the Completion Date until no later than 31
January 2022 (the "Transition Services Period") the Company will
provide certain transition services to GoDaddy Registry (the
"Transition Services"). 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.
Board Recommendation
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.
Irrevocable Undertakings
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.
Notice of General Meeting
The Sale will constitute a fundamental change of business of the
Company under Rule 15 of the AIM Rules and is subject to approval
of Shareholders as following the end of the Transition Services
Period the Company would cease to own, control or conduct all, or
substantially all, of its existing trading business activities or
assets.
Accordingly, should the Sale complete, at the end of the
Transition Services Period the Company would be classified as an
AIM Rule 15 cash shell and, as such, would be required to make an
acquisition or acquisitions which constitute a reverse takeover
under AIM Rule 14 (or seek re-admission as an investing company (as
defined under the AIM Rules)), on or before the date falling six
months from the end of the Transition Services Period, failing
which, the Company's Ordinary Shares would be suspended from
trading on AIM, pursuant to AIM Rule 40.
Admission of the Company's Ordinary Shares to trading on AIM
would be cancelled six months from the date of suspension should
the Company not complete such a transaction during this time. A
circular to shareholders and notice convening a General Meeting
(the "Circular") to be held virtually at 1500 BST on 23 April 2021
will be posted to Shareholders shortly and will be available on the
Company's website at www.mmx.co. The General Meeting will be
convened to consider, and if thought fit, approve the Resolution
set out in the Circular and notice.
The Board is closely monitoring the evolving Coronavirus
(COVID-19) situation and public health concerns including the
related social distancing requirements, public health guidance and
legislation issued by the UK Government. At the time of publication
of this notice, indoor public gatherings remain subject to a number
of restrictions. The Board recognizes that the General Meeting
represents an opportunity to engage with Shareholders, and provides
a forum that enables Shareholders to ask questions of, and speak
directly with, the Board. However, in light of current
restrictions, the Board hopes that Shareholders will understand
that the General Meeting will be held via the 'Investor Meet
Company' digital platform. To access the General Meeting, please
use the following link:
https://www.investormeetcompany.com/minds-machines-group-limited/register-investor
.
Questions can be submitted pre-event via the 'Investor Meet
Company' dashboard, or at any time during the live presentation via
the "Ask a Question" function. The Company will make arrangements
such that the legal requirements to hold the meeting can be
satisfied through the physical attendance of a minimum number of
members.
Required Approvals
The Sale Agreement is conditional upon the satisfaction of
certain conditions precedent (the "Conditions Precedent"),
including, but not limited to:
a) Receipt of the Rule 15 Approval at the General Meeting.
b) ICANN approval for the transfer of the TLDs to GoDaddy Registry.
c) Approval of Chinese authorities for the change of control of
MMX China (including change of control in respect of relevant
licenses held by MMX China permitting it to distribute TLDs in
China).
In addition, the sale of certain of the Assets is subject to
third-party approvals, as well as the waiver of certain rights of
first refusal to acquire certain Assets held by commercial partners
of the Company, and there being no material adverse change in the
ownership and/or performance of the Assets in the period prior to
the Completion Date.
The long-stop date for satisfaction of the Conditions Precedent
(or waiver in accordance with the terms of the Sale Agreement) is 7
August 2021.
Summary: Use of Proceeds and Taxation
-- Following receipt of the Consideration the Board will
consider the best way to maximise Shareholder value which is likely
to include returning a proportion of the cash to Shareholders
together with considering alternative acquisitions as provided
under Rule 15.
-- As set out below the Company is obliged to provide certain
services for the duration of the Transition Services Period as well
as retaining US$12 million in an escrow account until 31 March
2022. Once the Transition Services Period has completed the Company
will no longer have any material operating business and
the Company will be regarded as a cash shell under AIM Rule 15.
-- The timing and method of any distribution or other return of
capital remains to be confirmed and will be notified to
Shareholders in due course.
-- The quantum of any distribution or return of capital will
take into account the investment and/or acquisition opportunities
identified by the Company during the Rule 15 Period, and the wishes
of Shareholders following a consultation process which the Company
will commence following the Completion Date and which will include
one-to-one discussions with larger shareholders, and use of the
'Investor Meet Company' digital platform for an investor call or
presentation providing an opportunity for all shareholders to
provide their feedback to the Company.
A copy of the Circular is appended to this Announcement.
Shareholders are actively encouraged to review the Circular and in
particular sections "Use of Proceeds and Taxation" and "Risk
Factors" set out below and in particular the Risk Factors with the
heading "The Group will need to pay tax on the Consideration in
different jurisdictions".
Further information on the Sale is set out below.
For further information:
Minds + Machines Group Limited
Tony Farrow (CEO) via Belvedere Communications
Bryan Disher (CFO) Limited
finnCap Ltd Tel: 020 7220 0500
Corporate finance - Stuart Andrews / Carl
Holmes / Simon Hicks
Corporate broking - Tim Redfern / Richard
Chambers
Belvedere Communications Limited Tel: +44 (0) 20 3687
John West 2756
Llew Angus
For further information, please go to www.mmx.co
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR.
The following text is extracted from the Circular:
1. Introduction
This Document sets out details of the proposed Sale by the
Company of the Assets to Registry Services, LLC (an affiliate of
GoDaddy Inc.), pursuant to the terms of the Sale Agreement.
The Sale will constitute a fundamental change of business of the
Company under Rule 15 of the AIM Rules. Following the end of the
Transition Services Period, the Company would cease to own, control
or conduct all, or substantially all, of its existing trading
business activities or assets. Accordingly, should the Sale
complete, at the end of the Transition Services Period the Company
would be classified as an AIM Rule 15 cash shell and, as such,
would be required to make an acquisition or acquisitions which
constitute a reverse takeover under AIM Rule 14 (or seek
re-admission as an investing company (as defined under the AIM
Rules)), on or before the date falling six months from the end of
the Transition Services Period, failing which, the Company's
Ordinary Shares would be suspended from trading on AIM, pursuant to
AIM Rule 40. Admission of the Company's Ordinary Shares to trading
on AIM would be cancelled six months from the date of suspension
should the Company not complete such a transaction during this
time.
The Sale is subject to Shareholder approval at a General Meeting
of the Company and the purpose of this Document is therefore
to:
-- set out the background to and reasons for the Sale;
-- explain why the Board believes that the Sale is in the best
interests of the Company and Shareholders as a whole;
-- explain how the Sale will impact the Company; and
-- explain the Resolution to be put to Shareholders at the
General Meeting to be held at 1500 BST on 23 April 2021 and why the
Directors recommend that Shareholders vote in favour of the
Resolution.
2. Background to and Reasons for the Sale
Since 2014 the Company has operated as a Registry and Registrar
for a number of TLDs and has developed the Business to be
profitable and cash-flow-generative, now with a high degree of
recurring revenue .
However, the TLD industry has seen significant consolidation in
recent years. The Company has fixed overheads, not the least of
which are those associated with being a listed company on AIM, that
are too large relative to the cash generated by the TLDs,
overshadowing the generally positive performance of the Company's
TLD portfolio. Because of this, the current share price of the
Company on AIM does not, in the opinion of the Directors, reflect
the true value of the Company's assets.
The Board has continually sought to grow the business both
organically and via acquisition to maximise the inherent
operational gearing of its fixed overheads. The acquisition of the
ICM Registry in 2018 has materially enhanced the financial
performance of the Company, 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.
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 one of three options: 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. 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 Company was approached in December 2020 by GoDaddy Registry
who expressed an interest in making an all cash offer to acquire
the Business and Assets. 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 the proposed Sale
for total consideration of US$120 million in cash (subject to
customary adjustments detailed below) (the "Consideration").
The gross Consideration payable by GoDaddy Registry represents
an implied value of approximately 10 pence per Ordinary Share
(based on the Exchange Rate). After payment of estimated
Transaction Costs (including estimated taxes payable by the
Company), this represents an implied net asset value (at the
Exchange Rate) of 8.8 pence per Ordinary Share (the "Estimated
Offer Value Per 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 the date of this
Document of approximately US$8,200,000 generated from its current
trading activities ("Available Cash"). The Company has undertaken
preliminary tax analysis in relation to the 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
(being the day prior to the date of the Sale Agreement);
-- 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.
Completion of the Sale will not occur unless and until all of
the Conditions Precedent have been satisfied or waived in
accordance with the Sale Agreement by the Long-Stop Date. Approval
by shareholders of the Resolution at the General Meeting does not
guarantee that the Conditions Precedent will be satisfied (or
waived) and that Completion of the Sale will occur. The Estimated
Offer Value Per Share is based on initial assumptions of, and
analysis by, the Company regarding Transaction Costs (including in
particular tax payable by the Group in different jurisdictions as a
result of the Sale, and reliefs available for historic losses). If
the Transaction Costs are higher than forecast, the Estimated Offer
Value Per Share will be lower than as set out in this Document.
Shareholders are advised to review all of the Risk Factors set out
at part II of this Document.
As set out above the Company needs to operate at a significantly
larger scale to ensure that the true profitability of the Assets
are not overshadowed by the fixed operating cost of the business,
costs which are further exacerbated by being a listed company on
AIM. Having considered this proposal against the challenges of
remaining a small public company operator in a consolidating market
the Board believes that the proposal reflects an attractive
opportunity to realise the underlying value of the Business and
accordingly, the Board believes the Sale is in the best interests
of Shareholders.
3. Assets the subject of the Sale; Remaining Assets if Sale is Approved
Pursuant to the Sale Agreement (details of which are set out at
paragraph 6 below), the Company has reached agreement to sell the
Assets (including by way of the sale of certain subsidiaries) and
transfer its rights and obligations under contracts and government
approvals (including national, regional or city partnership
agreements) relevant for the operation of the Assets ("Contracts"),
as further described below. If the Sale is approved the Company
will have disposed of substantially all of its trading business and
operations (and the assets relating thereto).
The TLDs that are the subject of the proposed Sale are set out
below:
. VIP .NRW .CASA .VODKA
. XXX .FIT .MIAMI .FISHING
.PORN .BEER .SURF .BOSTON
.ADULT .YOGA .GARDEN .ABOGADO
.WORK .FASHION .HORSE .RODEO
.SEX .WEDDING .LUXE .DDS
.LAW .BAYERN .COOKING .COUNTRY
In addition to the TLDs, GoDaddy Registry will acquire four
subsidiaries of the Company (owned directly or indirectly),
being:
-- MMX Bayern (holds .BAYERN)
-- MMX China
-- MMX NRW (holds .NRW)
-- ICM Registry (holds .XXX, .ADULT, .PORN, and .SEX)
The assets GoDaddy Registry will acquire includes certain
intellectual property of the Group, including its AdultBlock
verification platform. The AdultBlock service allows brand owners
to block terms either previously registered in the Trademark
Clearinghouse (TMCH) or already registered in the .XXX Sunrise B
program. The AdultBlock service ensures the registered term is
blocked from registration across all four of the Company's adult
themed TLDs. The Company's AdultBlock+ service goes a step further,
combining the protections of AdultBlock along with the
functionality to block all look-alike variations that appear
confusingly similar to the trademarked term.
Rights and obligations of the Group under the Contracts (other
than obligations relating to the period prior to Completion),
including the right to receive future revenues and the obligation
to pay future liabilities under such Contracts, will also transfer
to GoDaddy Registry at Completion.
In addition to the Assets, certain employees of the Group are
expected to transfer to GoDaddy Registry. Those employees not
transferring to GoDaddy Registry are expected to be offered
continued employment with the Company for varying periods of time
following Completion to enable the Company to provide the
Transition Services to GoDaddy Registry.
4. Financial Information
The table below provides a summary of the Company's profit and
loss for the year ended 31 December 2019 and six months ended 30
June 2020, the last full and part years reported by the Company,
separating these results between revenues and expenses directly
associated with the assets subject to the proposed Sale and those
being retained by the Company.
Year ended December 31, 2019 Period ended June 30, 2020
Assets Assets
being being
disposed Assets disposed Assets
of retained Corporate Total of retained Corporate Total
$000 $000 $000 $000 $000 $000 $000 $000
Revenue 16,455 772 - 17,227 8,143 345 - 8,488
======== ======== ========= ======= ======== ======== ========= =======
Revenue
less partner
payments 14,245 99 - 14,345 7,362 71 - 7,433
Cost of
sales (3,311) (26) - (3,337) (1,766) (13) - (1,779)
-------- -------- --------- ------- -------- -------- --------- -------
Gross
profit 10,934 73 - 11,008 5,596 58 - 5,654
Operating
expenses (3,632) - (2,408) (6,040) (1,873) (1,289) (3,163)
Other (1,933) (51) - (1,984) (1,061) (1,061)
-------- -------- --------- ------- -------- -------- --------- -------
Profit
(loss)
before
tax 5,369 22 (2,408) 2,983 3,723 (1,003) (1,289) 1,431
======== ======== ========= ======== ======== =========
Income
tax (140) (1)
Profit 2,843 1,430
======= =======
Carrying
value
of
goodwill
and
intangibles 83,534 688 - 84,233 83,537 645 - 84,142
Current Trading
On 25 January 2021 the Company provided a trading update, an
extract of which is set out below.
"MMX revenues in FY 2020 were largely in line with those for FY
2019. Renewal revenue remained consistent in FY 2020 at 68%. FY
2020 new standard registration revenue increased to 24% with
reduced dependency on premium domains.
Billings declined 3% year on year, reflecting increases in most
TLDs but a significant drop in AdultBlock billings in FY 2020
following its initial launch in FY 2019. In FY 2020 98% of billings
were delivered through the registrar channel, eliminating the
Company's historical reliance on one-off brokered sales.
Domains Under Management ("DUMs") declined 19% in FY 2020
compared to FY 2019, with no loss in contribution, reflecting an
intentional shift by the Company to more profitable
transactions."
The Company will announce its audited results for the full year
ended 31 December 2020 in due course which are expected to be
consistent with the trading statement released on 25 January 2021.
Current trading remains in line with management expectations.
Whilst the Directors have seen some softness in .VIP renewals, the
Company's adult themed portfolio has started the current year
strongly. A key growth lever in 2021 is expected to be the 10 year
anniversary of the .XXX Sunrise B program and associated AdultBlock
sales. The Company remains optimistic of significant revenues from
this product based on discussions with and the uptake of
Registrars, but the anniversary period is not until Q4 therefore
the Company will be uncertain of the success of this service until
that time.
5. Information on GoDaddy Registry
GoDaddy Registry provides technical and operational services to
more than 200 TLDs, including .co, .us and .nyc. GoDaddy Registry's
bespoke, integrated registry solutions and global network of
channel distribution partners deliver measurable, sustainable
results. GoDaddy Registry is a wholly-owned subsidiary of GoDaddy
Inc. For the financial year ended 31 December 2020, GoDaddy Inc.
reported total group revenues of US$3.3 billion.
6. Summary of the Sale Agreement
The Company and GoDaddy Registry have entered into the Sale
Agreement, pursuant to which the Company has agreed to sell, and
GoDaddy Registry has agreed to purchase, the Assets (and be
transferred the rights and obligations under the Contracts) in
consideration 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 Completion Date.
The Sale Agreement is conditional upon the satisfaction of
certain conditions precedent (the "Conditions Precedent"),
including, but not limited to:
(a) Receipt of the Rule 15 Approval at the General Meeting.
(b) ICANN approval for the transfer of the TLDs to GoDaddy Registry.
(c) Approval of Chinese authorities for the change of control of
MMX China (including change of control in respect of relevant
licenses held by MMX China permitting it to distribute TLDs in
China).
In addition, the sale of certain of the Assets is subject to
third-party approvals (including in connection with the transfer of
certain Contracts), as well as the waiver of certain rights of
first refusal held by commercial partners of the Group, and there
being no material adverse change in the performance of the Business
or the Assets in the Interim Period.
Completion of the Sale will not occur unless and until all of
the Conditions Precedent have been satisfied or waived in
accordance with the Sale Agreement. Unless the period is extended,
the final date for satisfaction or waiver of the Conditions
Precedent is the Long-Stop Date. Approval by shareholders of the
Resolution at the General Meeting does not guarantee that the
Conditions Precedent will be satisfied (or waived) and that
Completion of the Sale will occur.
In the Interim Period prior to Completion the Company has
provided certain assurances to GoDaddy Registry in relation to the
continued operation of the Business and the Assets, including
restrictions on the Group's right to dispose of or otherwise grant
security over Assets, terminate Contracts, incur indebtedness
and/or commit to capital expenditure (outside the ordinary course),
terminate employment of certain individuals (or engage new
employees), change commercial terms (including payment and pricing
terms) with suppliers and customers, or cease to operate all or a
material part of the Business.
Subject to receiving Rule 15 Approval, the Company will use all
reasonable endeavours to secure relevant approvals from ICANN and
the applicable Chinese authorities, as well as to satisfy all other
Conditions Precedent. A further announcement by the Company in
relation to the timing of approvals will be released following
receipt of Rule 15 Approval.
Pursuant to the terms of the Sale Agreement, the Company
provided title and capacity warranties, and other warranties and
indemnities in relation to such matters as the Assets, certain
accounting and financial information, litigation and disputes.
Subject to Completion, until 31 March 2022 (the "Escrow Period")
US$12 million of the total Consideration (the "Escrow Amount") will
be held in an escrow account operated and maintained by the Escrow
Agent. Any claims by GoDaddy Registry under the Sale Agreement
against the Company will be satisfied by funds held in the Escrow
Amount. At the end of the Escrow Period the remaining balance of
the Escrow Amount will be released to the Company. Save for the
Escrow Amount, the Company is entitled to utilise and/or distribute
the Consideration as the Board may determine (with the Escrow
Amount (subject to any adjustments) being available to the Company
at the end of the Escrow Period).
7. The Company's continuing operations following the Sale
Subject to the Sale being approved by Shareholders, and the
Conditions Precedent being satisfied (or waived in accordance with
the Sale Agreement), following Completion the Company will continue
to own the following subsidiaries:
-- Minds + Machines Group Limited (BVI), is the legal owner of
issued shares and/or membership interests of
the following subsidiaries:
o Minds + Machines US, Inc. (100%)
o Minds + Machines Limited (Ireland) (100%)
o Minds and Machines Limited (UK) (100%)
o Minds and Machines Registrar UK Limited (100%)
o Minds + Machines Hungary (100%)
o LW TLD Limited (100%)
o ICM BVI Limited (100%)
o Dotcountry, LLC (50%)
-- Minds + Machines US, Inc, is the legal owner of issued shares
and/or membership interests of the
following subsidiaries:
o Minds + Machines, LLC (Florida) (100%)
o Boston TLD Management, LLC (99%)
o Minds and Machines, LLC (California) (100%)
-- Minds + Machines Limited (Ireland) is the legal owner of 100%
of the issued shares of the following subsidiary:
o Minds + Machines Registrar Limited
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.
Transition Period
For the period from Completion of the Sale until no later than
31 January 2022 the Company will provide the 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 will also be left with some residual assets, and
will retain the rights and obligations under certain material
contracts necessary for the operation of the retained assets as
well as delivery of the Transition Services. During the Transition
Period the Company will seek to dispose of or otherwise discontinue
operation of these assets and bring contracts to an orderly close,
and wind-up the Company's remaining subsidiaries.
The Sale Agreement includes a non-compete restriction on the
Company following Completion, preventing the Company from
soliciting customers or suppliers or employees or otherwise
competing with GoDaddy Registry in relation to the Assets.
Exercise of Options and RSUs
On Completion of the Sale, Options over in aggregate
approximately 7,274,500 Ordinary Shares of the Company will vest
irrevocably. If relevant Directors, management and employees
exercise such Options at or following completion of the Sale, the
corresponding number of new Ordinary Shares will be eligible to
participate in any distribution or other return of capital by the
Company. As at the date of this Document the Company has in
aggregate 875,618,996 issued Ordinary Shares and 886,878,996
Ordinary Shares on a fully diluted basis.
AIM Rule 15 Investment Company
The Sale, if approved, will result in the divestment of
substantially all of the Company's existing business and assets.
Following expiry of the Transition Services Period the Company will
be classified under AIM Rule 15 as a cash shell and as such will be
required to make an acquisition or acquisitions which constitute(s)
a reverse takeover under AIM Rule 14 (including seeking
re-admission as an investing company (as defined under the AIM
Rules)) on or before the date falling six months after the end of
such Transition Services Period failing which, the Company's
Ordinary Shares would be suspended from trading on AIM pursuant to
AIM Rule 40. Admission to trading on AIM would be cancelled six
months from the date of suspension should the reason for the
suspension not have been rectified.
8. Use of Proceeds and Taxation
As at the date of this Document the Company has Available Cash
of approximately US$8,200,000. This figure is expected to increase
in the Interim Period as the Company continues to operate the
Business, which is cash-flow positive.
Following receipt of the Consideration t he Board will consider
the best way to maximise Shareholder value which is likely to
include returning a proportion of the cash to Shareholders together
with considering alternative acquisitions as provided under Rule
15. As set out above the Company is obliged to provide certain
services for the duration of the Transition Services Period as well
as retaining US$12 million in an escrow account until 31 March
2022. Once the Transition Services Period has completed the Company
will no longer have any operating business and the Company will be
regarded as a cash shell under AIM Rule 15. The timing and method
of any distribution or other return of capital remains to be
confirmed and will be notified to Shareholders in due course. The
quantum of any distribution or return of capital will take into
account the investment and/or acquisition opportunities identified
by the Company during the Rule 15 Period, and the wishes of
Shareholders following a consultation process which the Company
will commence following the Completion Date and which will include
one-to-one discussions with larger shareholders, and use of the
'Investor Meet Company' digital platform for an investor call or
presentation providing an opportunity for all shareholders to
provide their feedback to the Company.
The Group will need to pay tax on the consideration received
from GoDaddy Registry in relation to the sale of certain of the
Assets in applicable jurisdictions. In addition, the Group will
have to pay certain costs associated with terminating agreements
with commercial partners, contractors and employees, as well as
paying professional fees and expenses associated with the Sale. A
portion of the gain on the Group's US assets is expected to be
sheltered by available loss carryforwards.
Shareholders should review the Risk Factors set out at Part II
of this Document, and in particular the Risk Factors with the
heading "The Group will need to pay tax on the Consideration in
different jurisdictions". The Company has undertaken a preliminary
tax review of the likely treatment of the Consideration (based on
the expected allocation of the Consideration between the Assets and
the Group's ability to utilise tax loss carryforwards) but there
can be no guarantee that the final tax amount payable by the Group
will not be higher than the Company's initial estimates, or that
certain expected reliefs and allowance for previous losses, will be
available, or that the allocation of the Consideration between
Assets will be as currently anticipated. The due date for payment
of tax will vary between different jurisdictions. If the amount of
tax payable by the Group is higher than expected the Estimated
Offer Value Per Share will be lower than estimated in this
Document.
The final amount of any distribution or return of capital, and
the timing of the same, will be notified to Shareholders in due
course following the Completion Date.
9. Risk Factors
The Shareholders should carefully consider the risks set out in
Part II of this Document relating to the Sale, along with all other
information set out in this Document. Should any of the risks
materialise, the market price of the Ordinary Shares may be
adversely affected.
10. General Meeting
COVID-19 special arrangements
The Board is closely monitoring the evolving Coronavirus
(COVID-19) situation and public health concerns in the United
Kingdom, including the related social distancing requirements,
public health guidance and legislation issued by the UK Government.
At the time of publication of this notice, indoor public gatherings
in England remain subject to a number of restrictions. The Board
recognises that the General Meeting represents an opportunity to
engage with Shareholders, and provides a forum that enables
Shareholders to ask questions of, and speak directly with, the
Board. However, in light of current restrictions, the Board hopes
that Shareholders will understand that the General Meeting will be
held via the 'Investor Meet Company' digital platform. To access
the General Meeting, please use the following link :
https://www.investormeetcompany.com/minds-machines-group-limited/register-investor
. Questions can be submitted pre-event via the 'Investor Meet
Company' dashboard, or at any time during the live presentation via
the "Ask a Question" function. The Company will make arrangements
such that the legal requirements to hold the meeting can be
satisfied through the physical attendance of a minimum number of
members.
Shareholders are therefore strongly encouraged to submit a proxy
vote in advance of the meeting. A Form of Proxy for use at this
meeting accompanies this notice. To be valid, the Form of Proxy
must be completed and returned to Computershare Investor Services
(Jersey) Limited at c/o Computershare Investor Services PLC in
accordance with the instructions in the Notes appended to the
Notice. Given the restrictions on attendance, members are strongly
encouraged to appoint the 'Chair of the Meeting' as their proxy
rather than a named person who will not be permitted to attend the
meeting.
This situation is constantly evolving, and the UK Government may
change current restrictions or implement further measures relating
to the holding of general meetings during the affected period. Any
changes to the arrangements for the General Meeting (including,
without limitation, as to proxy appointments, attendance, venue,
format, the business to be considered or timing, as the case may
be) will be communicated to members before the meeting through our
website and, where appropriate, via the Regulatory News
Service.
The Notice of General Meeting
The Notice convening the General Meeting to be held virtually
via the 'Investor Meet Company' digital platform at 1500 BST on 23
April 2021 at which the Resolution to approve the Sale will be put
to Shareholders is set out in the notice of general meeting
enclosed with this Document.
The Resolution - Sale
The Resolution will be proposed as an ordinary resolution,
seeking approval of the Sale pursuant to the terms of the Sale
Agreement and as required under Rule 15 of the AIM Rules.
11. Action to be taken
Voting on the Resolution set out in the Notice of General
Meeting will be conducted on a poll which reflects Shareholders'
voting intentions in respect of shares held and votes tendered.
A Form of Proxy for use at the General Meeting is enclosed with
this Document.
Shareholders holding Ordinary Shares in certificated form should
complete and sign the Form of Proxy and return it to Computershare
Investor Services (Jersey) Limited at c/o Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY as
soon as possible, but in any event the Form of Proxy is to be
received not later than 1500 BST on 21 April 2021, being 48 hours
before the time fixed for holding the General Meeting. We encourage
Shareholders to appoint the Chair of the Meeting as their proxy
with their voting instructions. In light of the COVID-19 measures
being taken at the General Meeting, no Shareholder will be allowed
entry into the physical meeting, but Shareholders may access the
General Meeting virtually by using the following link:
https://www.investormeetcompany.com/minds-machines-group-limited/register-investor
.
Shareholders holding Ordinary Shares in uncertificated form
should complete and sign the Form of Instruction and return it to
Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol BS99 6ZY or by email to
#UKCSBRS.ExternalProxyQueries@computershare.co.uk as soon as
possible but in any event to be received not later than 1500 BST on
20 April 2021, or 72 hours before any adjourned meeting. The
Company is accepting returns by email in relation to the General
Meeting due to current Covid restrictions and potential delays
returning the same by post. There is no guarantee that returns by
email will be accepted by the Company or the Registrar in future
years or for future shareholder meetings.
12. Irrevocable Undertakings
The Company has received signed irrevocable undertakings from
certain Shareholders holding, in aggregate, 561,327,371 Ordinary
Shares as at the date of this Document 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.
13. Recommendation
The Board considers the terms of the Sale to be fair and
reasonable and that the Resolution to be proposed at the General
Meeting 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 2.5 per cent.
of the current issued share capital of the Company.
DEFINITIONS
The following definitions apply throughout this announcement,
unless the context requires otherwise:
"Acquisition" the proposed acquisition by GoDaddy
Registry of the Assets from the
Company in accordance with the
terms of the Sale Agreement
"AIM" the AIM Market operated by the
London Stock Exchange plc
"AIM Rules" together, the AIM Rules for Companies,
the AIM Rules for Nominated Advisers
and the AIM Dis-ciplinary Procedures
and Appeals Handbook as published
from time to time
"Assets" certain of the Business assets
and entities owned directly or
indirectly by the Company, as
more particularly set out at paragraph
3 of part I of this Document
"Business" the business of operating a TLD
Registrar and Registry, as carried
on by the Group
"Business Day" a day (other than a Saturday,
Sunday or public holiday) on which
banks are open in London, England
and New York, United States of
America for a full range of business
"BVI" the British Virgin Islands
"Company" or "MMX" Minds + Machines Group Limited,
a company incorporated and registered
in the BVI, with registered number
1412814
"Completion" completion of the Sale
"Completion Date" the date of Completion being the
date that is the first Business
Day of the month immediately following
the month in which the Conditions
Precedent have been satisfied
or, to the extent permitted by
the Sale Agreement, waived, provided
that, to the extent such proposed
completion date is less than five
Business Days after the date on
which the Conditions Precedent
have been satisfied or waived
(as applicable), Completion shall
instead take place on the date
that is the first Business Day
of the subsequent month, or on
such other date or at such other
place as the parties may agree
to in writing
"Conditions Precedent" the conditions precedent to the
Sale by the Company, set out in
the Sale Agreement and more particularly
described at paragraph 6 of Part
I of this Document
"CREST" the computerised settlement system
(as defined in the CREST Regulations),
operated by Euroclear, which facilitates
the transfer of title to shares
in uncertificated form
"CREST Regulations" the Uncertificated Securities
Regulations 2006 (SD No. 743/06
of the Isle of Man
"Depositary" Computershare Investor Services
PLC of The Pavilions, Bridgwater
Road, Bristol, BS99 6ZY
"Depositary Interests" interests representing Ordinary
Shares, issued through the Depositary,
held by investors in the Company
in CREST
"Directors" or the "Board" the directors of the Company whose
names are set out on page 5 of
this Document
"Document" this document, containing details
of the Proposal
"Escrow Agent" Citibank, N.A
"Euroclear" Euroclear UK & Ireland Limited,
a company incorporated in England
and Wales and the operator of
CREST
"Exchange Rate" the USD:GBP exchange rate published
by The Financial Times on 6 April
2021
"finnCap" finnCap Ltd, the Company's Nominated
Adviser as at the date of this
Document
"Form of Instruction" the form of instruction for use
by holders of Depositary Interests
in connection with the General
Meeting
"Form of Proxy" the form of proxy for use by the
Shareholders in connection with
the General Meeting
"General Meeting" the general meeting of Shareholders
to be held virtually via the 'Investor
Meet Company' digital platform
at 1500 BST on 23 April 2021,
notice of which is set out at
Part III of this Document, or
any adjournment of that meeting
"GoDaddy Registry" Registry Services, LLC, a Delaware
limited liability company
"Group" the Company and its subsidiary
undertakings at the date of this
Document
"ICANN" The Internet Corporation for Assigned
Names and Numbers, a non-profit
private organisation that regulates
a number of internet governance
and organisational matters
"ICM Group" ICM Registry and its wholly owned
subsidiaries ICM Registry AD LLC,
ICM Registry PN LLC and ICM Registry
SX LLC
"ICM Registry" ICM Registry, LLC, a limited liability
company incorporated in Delaware
which is an indirect wholly owned
subsidiary of the Company
"Interim Period" the period between the date of
the Sale Agreement and the Completion
Date during which time the Company
will continue to operate the Business
and shall remain the owner of
the Assets
"Long-Stop Date" 7 August 2021
"MMX Bayern" Bayern Connect GmbH, a limited
liability company incorporated
in Germany which is a wholly owned
subsidiary of the Company
"MMX China" Beijing MMX Tech Co. Ltd , a company
incorporated in China which is
a wholly owned subsidiary of the
Company
"MMX NRW" Minds + Machines GmbH, a limited
liability company incorporated
in Germany which is a wholly owned
subsidiary of the Company
"Nominated Adviser" finnCap, the Company's nominated
adviser in accordance with the
AIM Rules
"Notice" the notice of the General Meeting
set out at the end of this Document
"Options" options over Ordinary Shares and/or
restricted stock units outstanding
as at the date of this Document
"Ordinary Shares" the ordinary shares of the Company
of nil par value
"Proposal" the proposal set out in this Document,
whereby Shareholders are being
asked to consider and, if thought
fit, approve the Sale
"Registrar" an entity that has entered into
a Registrar accreditation agreement
with ICANN and has access to make
changes to a registry by adding,
deleting, or updating Domain Name
records
"Registry" the authoritative master database
of all domain names registered
in each TLD
"Resolution" the resolution set out in the
Notice to be proposed at the General
Meeting to approve the proposed
Sale
"Rule 15 Approval" approval by Shareholders of the
Sale by the Company of the Assets
to GoDaddy Registry (pursuant
to Rule 15 of the AIM Rules)
"Rule 15 Period" the 12 month period following
the Sale during which period the
Company would be required to make
an acquisition or acquisitions
which constitute a reverse takeover
under AIM Rule 14 (or seek re-admission
as an investing company (as defined
under the AIM Rules)), failing
which the trading of the Company's
Ordinary Shares on AIM would be
cancelled
"Sale" the proposed sale by the Company
of the Assets to GoDaddy Registry
in accordance with the terms of
the Sale Agreement
"Sale Agreement" the conditional asset purchase
agreement between the Company
and GoDaddy Registry dated 7 April
2021, setting out the terms of
the Sale and Acquisition, and
the Conditions Precedent thereto
"Shareholders" holders of Ordinary Shares in
the Company
"Share Registrar" Computershare Investor Services
(Jersey) Limited 13 Castle Street,
St Helier, Jersey, JE1 1ES, Channel
Islands
"TLD" a top-level domain
"Transaction Costs" direct and indirect costs and
expenses incurred by the Group
in relation to the proposed Sale
including but is not limited to:
(a) all taxes payable by the Group
in relevant jurisdictions arising
from the sale of the Assets and
the distribution of the consideration
received by the Group to the Company;
(b) the third party contractor
and/or professional costs and
expenses incurred by the Group
negotiating the Sale, convening
the General Meeting, satisfying
the Conditions Precedent, and
completing the Sale;
(c) additional one-off and exceptional
costs incurred by the Group in
relation to the transfer of the
Assets;
(d) additional one-off and exceptional
costs incurred by the Group in
relation to the termination of
certain commercial agreements,
employment and consulting contracts,
payment of bonuses and/or other
employment related costs relating
to the Sale; and
(e) expected costs incurred by
the Group winding down retained
operations and liquidating dormant
subsidiaries (and the associated
costs of retaining employees and
management to complete this exercise)
"Transition Services" the services to be provided by
the Group during the Transition
Services Period, including services
relating to:
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
"Transition Services Period" a transition period ending on
or before 31 January 2022 (unless
agreed otherwise by the parties)
during which the Company will
provide the Transition Services
to GoDaddy Registry to ensure
the smooth transition of the Assets
and employees following approval
of the Sale
"uncertificated" or "in uncertificated recorded on the register of Ordinary
form" Shares as being held in uncertificated
form in CREST, entitlement to
which, by virtue of the CREST
Regulations, may be transferred
by means of CREST
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END
FURIRMBTMTJMTPB
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