More details on the $120 million sale of 28 New gTLDs to GoDaddy

Minds + Machines (MMX) shared more details today on the proposed sale of 28 New gTLDs (and other assets) to GoDaddy for $120 million.

The 28 New gTLDs that are the subject of the proposed sale are these:

• .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

It is a bit strange that GoDaddy, that in the past didn’t want any involvement with “adult” domain names will now be the owner of .XXX, .PORN, SEX and .ADULT.

In November 2020 MMX announced that the Board was commencing a formal investigation to determine whether certain revenue has been correctly recognized and also announced some board changes.

Here is the announcement from today:

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

The Consideration

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:

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

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) Bryan Disher (CFO)	via Belvedere Communications Limited
finnCap Ltd	Tel: 020 7220 0500
Corporate finance – Stuart Andrews / Carl Holmes / Simon Hicks Corporate broking – Tim Redfern / Richard Chambers
Belvedere Communications Limited John West Llew Angus	Tel: +44 (0) 20 3687 2756

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.

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:

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.

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.

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 being disposed of Assets retained Assets being disposed of Assets retained Corporate Total 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.

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.

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).

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.

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 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 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.

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.

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.

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.

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.

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 form”	recorded on the register of Ordinary 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