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Donuts gets bought by former ICANN CEO’s firm

Kevin Murphy, September 5, 2018, Domain Registries

Donuts is to be bought by a private equity firm that has a former ICANN CEO as a partner.

The company, which holds the largest portfolio of new gTLDs, has agreed to be acquired by Boston-based private equity firm Abry Partners for an undisclosed sum.

Not much info about the deal has been released, but one senses an ICANN alum’s hand at the wheel.

Former ICANN chief Fadi Chehade is a partner at Abry, having been initially employed as senior advisor on digital strategy back in 2016 after he left ICANN.

Abry, on its web site, says it focuses its investments on profitable companies, adding:

Depending on the type of fund, we target investments from $20 million to $200 million.

Since Abry’s inception, we’ve developed deep industry expertise in Broadband, Business Services, Communications, Cybersecurity, Healthcare IT, Information Services, Insurance Services, Internet-of-Things, Logistics, Media, and Software as a Service.

Since its formation in 1989, Abry has “completed more than $77 billion of transactions, representing investments in more than 650 properties.”

Donuts was founded by domain veterans Paul Stahura, Jon Nevett, Richard Tindal and Daniel Schindler in order to take advantage of ICANN’s new gTLD program..

It was initially funded by $100 million from Austin Ventures, Adams Street Partners, Emergence Capital Partners, TL Ventures, Generation Partners and Stahurricane.

It currently runs over 200 TLDs, the most populous of which I believe is .ltd, with over 400,000 names.

Donuts is the latest of a series of domain companies to exit via the private equity route, notably following Neustar and Web.com.

Chehade was ICANN’s CEO between 2012 and 2015. While he was not involved in the industry during the new gTLD’s program’s inception, he did oversee its early years.

More consolidation? Endurance said to be up for sale

Kevin Murphy, August 27, 2018, Domain Registrars

Endurance International Group is reportedly up for sale, perhaps the next piece of consolidation or privatization in a rapidly changing domain name market.

Bloomberg, citing unnamed sources, reports today that EIG is “is considering strategic options, including a possible sale”.

EIG owns domain brands Domain.com, BigRock, BuyDomains and ResellerClub, along with a bunch of hosting properties such as HostGator.

Bloomberg’s sources stressed that no final decision has been made, and that the company could remain public.

It’s currently listed on Nasdaq where it has a market cap today of almost $1.38 billion .

The company would be far from the first to change ownership in the last couple of years.

Most recently, Web.com (Network Solutions et al) announced a plan to go private in a $2 billion deal.

A year ago, Neustar went private in a $2.9 billion deal.

In terms of industry consolidation, we’ve more recently seen KeyDrive reverse into CentralNic and MMX buy ICM Registry.

KeyDrive reverses into CentralNic in $55 million deal

CentralNic this morning confirmed that it has signed a deal to merge with KeyDrive to dramatically grow its market share in the registrar and registry markets.

The deal, technically a reverse takeover, is worth up to $55 million, $10.5 million of which is performance-related.

KeyDrive is the holding company for brands including the registrars Key-Systems, Moniker and BrandShelter and the registries OpenRegistry and KSRegistry.

It is by far the bigger player in the registrar space. The combined company will have 7.1 million domains under management, 5.8 million of which will come from the Luxembourg-based firm.

“The acquisition of KeyDrive is transformative for CentralNic, significantly increasing the Company’s scale and giving it significant extra firepower in the domain name industry to rival the traditional major players,” CentralNic CEO Ben Crawford said in a statement.

CentralNic says the deal will make it the 11th-largest registrar in terms of gTLD domains under management and the fifth-largest registry back-end in terms of TLDs managed (which will hit 118).

KeyDrive had 2017 revenue of $58.26 million and adjusted EBITDA of $5.87 million. Operating profit was $4.3 million.

CentralNic had 2017 revenue of £24.3 million ($32.2 million), adjusted EBITDA of £6.6 million ($8.7 million) and operating profit of £1.8 million ($2.4 million). These numbers do not include the £3.2 million-a-year SKNIC business, which CentralNic acquired right at the end of last year.

KeyDrive CEO Alexander Siffrin will become COO of CentralNic and one of its largest shareholders, owning 16.4% of the combined company’s shares.

The acquisition itself is fairly complex.

CentralNic will raise $16.5 million cash in a share placement and it will issue $19.3 million of shares to a holding company majority-owned by Siffrin. The remaining $10.5 million is performance related and may be paid in a combination of cash and shares, mostly shares.

It’s all subject to shareholder approval at an August 1 general meeting.

Assuming the deal closes, CentralNic says its plan is to become the “GoDaddy of Emerging Markets”, though what this means in practice is not immediately clear.

It does seem that there will be some job losses as the company rationalizes staffing across its various locations.

As far as technical integration goes, CentralNic’s registrars will migrate to KeyDrive’s platform and KeyDrive’s registries will migrate to CentralNic’s registry platform.

The potential for a deal was first revealed in March, after a leak. Trading in its shares was halted as a result, but resumed this morning.

Web.com to be acquired for $2 billion

Web.com is to go private in a deal valued at roughly $2 billion.

The company, which owns pioneering registrars Network Solutions and Register.com as well as SnapNames and half of NameJet, will be bought by an affiliate of Siris Capital Group, a private equity firm.

The cash, $25-a-share deal has been approved by the Web.com board but is still open to higher bids from third parties until August 5.

The offer is a 30% premium over Web.com’s 90-day average price prior to the deal’s announcement.

While Nasdaq-listed Web.com has briefly topped $26 over the last year, you’d have to go back five years to find it consistently over the $25 mark.

After ICANN nod, MMX buys .xxx

MMX has closed the acquisition of porn-focused ICM Registry, after receiving the all-clear from ICANN for the contract transfers.

The deal is worth roughly $41 million — $10 million cash and about $31 million in stock.

ICM runs .xxx from the 2003 gTLD application round (though it didn’t go live until 2011) and .porn, .adult and .sex from the 2012 round.

MMX, which now has 29 fully-owned TLDs and another five in partnerships, will now become roughly a quarter-owned by former ICM employees and its back-end provider, Afilias.

ICM president Stuart Lawley now owns 15% of MMX and is its largest shareholder.

CEO Toby Hall said in a statement to the markets that he has “identified a number areas of potential growth and synergy”.

The company noted that the deal increases the share of its revenue coming from the US and Europe, implicitly highlighting the reduction of its exposure to the volatile Chinese market, where .vip has been its biggest money-spinner to date.

ICM had something like 152,000 .xxx domains under management at the last count, but over 80,000 of those are reservations. It has about 92,000 names in its zone file currently.

The three 2012-round names are faring less well, with about 8,000 to 10,000 names apiece in their zones.

Somebody once jokingly told me that ICM stood for “Internet Cash Machine”, due to the perception that porn-focused names would sell like, well, porn. Just thought I’d mention that.

MMX rejected three takeover bids before buying .xxx

MMX talked to three other domain name companies about potentially selling itself before deciding instead to go on the offensive, picking up ICM Registry for about $41 million.

The company came out of a year-long strategic review on Friday with the shock news that it had agreed to buy the .xxx, .adult, .porn and .sex registry, for $10 million cash and about $31 million in stock.

CEO Toby Hall told DI today that informal talks about MMX being sold or merged via reverse takeover had gone on with numerous companies over the last 11 months, but that they only proceeded to formal negotiations in three cases.

Hall said he’d been chatting to ICM president and majority owner Stuart Lawley about a possible combination for over two years.

ICM itself talked to four potential buyers before going with MMX’s offer, according to ICM.

Lawley, who’s quitting the company, will become MMX’s largest shareholder following the deal, with about 15% of the company’s shares. Five other senior managers, as well as ICM investor and back-end provider Afilias, will also get stock.

Combined, ICM-related entities will own roughly a quarter of MMX after the deal closes, Hall said.

ICM, with its high-price domains and pre-2012 early-mover advantage, is the much more profitable company.

It had sales of $7.3 million and net income of $3.5 million in 2017, on approximately 100,000 registrations.

Compared to MMX, that’s about the same amount of profit on about half the revenue. It just reported 2017 profit of $3.8 million on revenue of $14.3 million.

There’s doesn’t seem to be much need or desire to start swinging the cost-cutting axe at ICM, in other words. Jobs appear safe.

“This isn’t a business in any way that is in need of restructuring,” Hall said.

He added that he has no plans to ditch Afilias as back-end registry provider for the four gTLDs. MMX’s default back-end for the years since it ditched its self-hosted infrastructure has been Nominet.

The deal reduces MMX’s exposure to the volatile Chinese market, where its .vip TLD has proved popular, accounting for over half of the registry’s domains under management.

It also gives MMX ownership of ICM’s potentially lucrative portfolio of reserved premium names.

There are over 9,700 of these, with a combined buy-now price of just shy of $135 million.

I asked Hall whether he had any plans to get these names sold. He laughed, said “the answer is yes”, and declined to elaborate.

ICM currently has a sales staff of three people, he said.

“It’s a small team, but their track record is exceptional,” he said.

The company’s record, I believe, is sex.xxx, which sold for $3 million. It has many six-figure sales on record. Premiums renew at standard reg fee, around $60.

With the ICM deal, MMX has recast itself after a year of uncertainty as an acquirer rather than an acquisition target.

While many observers — including yours truly — had assumed a sale or merger were on the cards, MMX has gone the other route instead.

It’s secured a $3 million line of credit from its current largest shareholder, London and Capital Asset Management Ltd, “to support future innovation and acquisition orientated activity”.

That’s not a hell of a lot of money to run around snapping up rival gTLDs, but Hall said that it showed that investors are supportive of MMX’s new strategy.

So does this mean MMX is going to start devouring failing gTLDs for peanuts? Not necessarily, but Hall wouldn’t rule anything out.

“Our long-term strategy is ultimately based around being an annuity-based business,” he said. He’s looking at companies with a “strong recurring revenue model”.

About 78% of ICM’s revenue last year came from domain renewals. The remainder was premium sales. For MMX, renewal revenue doubled to $4.8 million in 2017, but that’s still only a third of its overall revenue (though MMX is of course a less-mature business).

So while Hall refused to rule out looking at buying up “struggling” gTLDs, I get the impression he’s not particularly interested in taking risks on unproven strings.

“You can never say never to any opportunity,” he said. “If we come across and asset and for whatever reason we believe we can monetize it, it could become an acquisition target.”

The acquisition is dependent on ICANN approving the handover of registry contracts, something that doesn’t usually present a problem in this kind of M&A.

101domain founders suing Afilias over unpaid $1 million after $15.5 million acquisition

The two former owners of 101domain are suing Afilias over an unpaid $1 million portion of their $15.5 million acquisition deal.

And Afilias is suing them right back, claiming it doesn’t have to pay because the deal left it saddled with an undisclosed tax bill in excess of $1 million.

The suit was filed by Anthony Beltran and Wolfgang Reile, who has since died, in February and Afilias counter-sued a couple of weeks ago, but I only recently became aware of the case and I don’t believe it’s been reported elsewhere.

Afilias bought 101domain back in 2015 for a then-undisclosed sum, its first big push into the registrar side of the industry.

Court documents now reveal that the Ireland-registered company gave 90%-owner Reile and 10%-owner Beltran a combined $12.5 million cash, along with a promissory note to pay $3 million more over the next two years.

Afilias paid them the first $2 million owed in September 2016, but when it came to paying the remaining $1 million the company refused, saying it had discovered 101domain had a VAT liability from before the deal closed of around $875,000.

Last month, after the suit was filed, it re-estimated the alleged liability at over $1 million.

Under the terms of the promissory note, Afilias reckons it does not have to pay up. What’s more, it wants the two men to cover the difference between the money it owes them and the amount of the tax bill.

In their initial complaint (pdf), Reile and Beltran disputed whether the liability even exists, saying “Afilias has failed to provide an adequate accounting for the purported pre-closing VAT liability”.

Reile died April 6, but Afilias filed its counter-complaint (pdf) April 19 and the legal wheels still appear to be turning.

Beltran, who declined to comment on the case, is still listed as 101domain’s president on the registrar’s web site.

MMX could announce acquisition this week

New gTLD registry MMX could announce plans to be acquired as early as this week.

The company told the markets last week that its delayed 2017 financial results would be announced in “early May”, along with the “conclusion of the strategic review” it has been teasing investors about for almost a year.

The “strategic review”, announced last May, is exploring “how MMX can participate in a broader industry consolidation” including acquisition or merger.

MMX said last week that “constructive discussions continue to progress”.

It has previously described the duration of the negotiations, initially slated to close last September, as “frustrating”.

Unlike AIM-listed rival CentralNic, which has confirmed it is in reverse-takeover talks with KeyDrive, MMX has not revealed which potential buyer(s) it has been talking to.

MMX, also listed on AIM, has a market cap of £69.3 million ($94.3 million) today.

In January, it informally reported that its 2017 billings are expected to be around the $15.6 million mark, allowing the company to hit operating profitability for the first time.

The company runs 25 new gTLDs solo and five more in partnerships with other companies, but by far and a way the best volume performer is .vip, which accounts for well over half of its registrations largely due to its resonance in China.

CentralNic and KeyDrive in merger talks

Kevin Murphy, March 14, 2018, Domain Registries

CentralNic and KeyDrive, two major European domain firms, are in merger talks, CentralNic confirmed this morning.

CentralNic said that the transaction, should it close, would be a “reverse takeover” of itself by KeyDrive.

That’s where a private company, in this case KeyDrive, reverses into a public one, in this case AIM-listed CentralNic.

Luxembourg-based KeyDrive is the holding company for brands including the registrars Key-Systems, Moniker and BrandShelter and the registries OpenRegistry and KSRegistry.

London-based CentralNic is a registry provider for the likes of .xyz, recent acquirer of Slovakian TLD .sk, and owner of registrars Internet.bs and Instra.

CentralNic said: “CentralNic and KeyDrive Group believe that the combination of the two businesses would have strong strategic logic and economies of scale, and would represent an opportunity to create a group with advanced technology platforms delivering significant recurring revenues for every major customer type within the industry.”

If a deal should be struck, it would happen in the second quarter, the company said.

The announcement was made today after news of the talks leaked.

Trading in CentralNic shares has been temporarily suspended.

Donuts may make .travel names easier to buy after acquiring its first legacy gTLD

Kevin Murphy, February 14, 2018, Domain Registries

Donuts has added .travel to its swelling portfolio of gTLDs, under a deal with original registry Tralliance announced today.

It’s the company’s first acquisition of a legacy, pre-2012 gTLD, and the first “community” gTLD to join its stable of strings, which now stands at 239.

.travel went live in 2005, a part of ICANN’s 2003 round of “sponsored” TLD applications.

As a sponsored TLD, .travel has eligibility and authentication requirements, but executive vice president Jon Nevett told DI that Donuts will look at “tinkering with” the current process to make domains easier to buy.

The current system requires what amounts to basically a self-declaration that you belong to the travel community, he said, but you have to visit the registry’s web site to obtain an authentication code before a registrar will let you buy a .travel domain.

Given that the community captured by .travel is extremely broad — you could be somebody blogging about their vacations and qualify — it seems to be a barrier of limited usefulness.

Nevett said Donuts has no immediate plans to migrate the TLD away from the Neustar back-end upon which it currently sits.

The rest of its portfolio runs on its own in-house registry platform, and one imagines that .travel will wind up there one day.

While .travel is one of Donuts most-expensive domains — priced at $99 retail at its own Name.com registrar — Nevett said there are no plans to cut pricing as yet.

There may be discounts, he said, and possibly promotions involving bundling with other travel-related gTLDs in its portfolio.

Donuts already runs .city, .holiday, .flights, .cruises, .vacations and several other thematically synergistic name spaces.

.travel had about 18,000 domains registered at the last count, with EnCirca, Name.com, 101domain, Key-Systems and CSC Corporate as its top five registrars.

It peaked 10 years ago at just under 215,000 registrations, largely due to to speculative bulk registrations made by parties connected to the registry that were dumped a couple of years later.

It’s been at under 20,000 names for the last five years, shrinking by small amounts every year.

The price of the acquisition was not disclosed.