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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.

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.

$55 billion bank not paying its $6,250 ICANN fees

Kevin Murphy, April 30, 2018, Domain Registries

Kuwait Finance House has become the latest new gTLD registry to get slapped with an ICANN breach notice for not paying its quarterly fees.

The company is a 40-year-old, Sharia-compliant Kuwaiti bank managing assets of $55.52 billion, according to Wikipedia. It has annual revenue in excess of $700 million.

But apparently it has not paid its fixed ICANN dues — $6,250 per quarter — for at least six months, according to ICANN’s breach letter (pdf).

KFH runs .kfh and the Arabic internationalized domain name equivalent .بيتك (.xn--ngbe9e0a) as closed, dot-brand domains.

Neither appears to have any live sites, but both appear to be in their launch ramp-up phase.

ICANN has been nagging the company to pay overdue fees since November, without success, according to its letter.

They’re the third and fourth new gTLD registries to get deadbeat breach notices this month, after .qpon and .fan and .fans.

Muslim world still thinks .islam isn’t kosher

Kevin Murphy, April 23, 2018, Domain Policy

The Organization of Islamic Cooperation has repeated its objection to the gTLDs .islam and .halal ever seeing the light of day.

OIC Secretary General Yousef Al-Othaimeen wrote to ICANN earlier this month to declare that its position on the two controversial applications has not changed since it initially objected to them in 2013.

The OIC comprises the foreign ministers from 57 majority-Muslim countries and these ministers recently voted unanimously to re-adopt the 2013 objection, Al-Othaimeen said (pdf).

The group “maintain the position that the new gTLDs with Islamic identity are extremely sensitive in nature as they concern the entire Muslim nature” he wrote.

He reiterated “official opposition of the OIC Member states towards the probable authorization that might allow the use of these gTLDs .islam and .halal by any entity.”

This puts ICANN between a rock an a hard place.

The applicant for both strings, Turkish outfit Asia-Green IT Systems (AGIT), won an Independent Review Process case against ICANN last November.

The IRP panel ruled that ICANN broke its own bylaws when it placed .islam and .halal into permanent limbo — an “On Hold” status pending withdrawal of the applications or OIC approval — in 2014.

ICANN’s board accepted the ruling and bounced the decision on whether to finally approve or reject the bids to its Board Accountability Mechanisms Committee, which is currently mulling over the problem.

Technically, it’s “non-consensus Governmental Advisory Committee advice”, which means the board has some wriggle room to simply accept the advice and reject the applications.

But AGIT’s lawyer disagrees, recently telling ICANN (pdf) its options are to approve the bids or facilitate dialogue towards their approval, rather like ICANN is doing with .amazon right now.

Child abuse becoming big problem for new gTLDs

Kevin Murphy, April 18, 2018, Domain Policy

There were 3,791 domain names used to host child sexual abuse imagery in 2017, up 57%, according to the latest annual report from the Internet Watch Foundation.

While .com was the by far the worst TLD for such material in terms of URLs, over a quarter of the domains were registered in new gTLDs.

Abuse imagery was found on 78,589 URLs on 3,791 domains in 152 TLDs, the IWF said in its report.

.com accounted for 39,937 of these URLs, a little over half of the total, with .net, .org, .ru and .co also in the top five TLDs. Together they accounted for 85% of all the abuse URLs found. The 2016 top five TLDs included .se, .io and .cc.

New gTLDs accounted for a small portion of the abuse URLs — just over 5,000, up 221% on 2016 — but a disproportionate number of domains.

The number of new gTLD domains used for abuse content was 1,063, spread over 50 new gTLDs. Equivalent numbers were not available in the 2016 report and IWF does not break down which TLDs were most-abused.

According to Verisign’s Q4 Domain Name Industry Brief (pdf), new gTLDs account for just 6.2% of all existing domain names, and yet they account for over 28% of the domains where IWF found child abuse imagery.

IWF said that the increasing number of domains registered to host abuse imagery can be linked to what it calls “disguised websites”.

These are sites “where the child sexual abuse imagery will only be revealed to someone who has followed a pre-set digital pathway — to anyone else, they will be shown legal content.”

Presumably this means that registries and registrars spot-checking domains they have under management could be unaware of their true intended use.