CentralNic and KeyDrive to combine in mega deal

Internet domain service company CentralNic has entered into a conditional agreement to acquire the entire share capital of KeyDrive and its subsidiaries for an initial consideration of $35.8m, it announced on Monday.

The AIM-traded firm said that represented an enterprise value of $44.5m, adding that it would also pay a performance-based earn out of up to $10.5m.

It described KeyDrive as a “global technology business”, which operates in the domain name services industry.

KeyDrive develops and operates software platforms used for selling subscription-based tools for businesses to operate online, including domain names, hosting, email, domain portfolio management and online advertising services.

In the year to 31 December, KeyDrive generated revenues of $58.26m and adjusted EBITDA of $5.87m.

CentralNic said the acquisition would substantially increase its scale and product range, adding KeyDrive's strength in the domain reseller and corporate services market to CentralNic's existing expertise in the domain registry and retail registrar segments.

Its board said it believed that opportunities for both cost and revenue synergies existed, which it expected to be realised as the two businesses were integrated.

The enlarged group would rank as the 11th largest domain name registrar globally by gTLD volume, and be among the top five registry service providers by number of registry clients.

CentralNic said consideration for the acquisition comprised $16.5m in cash funded from the placing proceeds, the issue of 28,006,607 consideration shares valued at $19.3m at the placing price to Inter.Services - a holding company whose largest shareholder is Alex Siffrin, CEO of KeyDrive, and a performance-based earn-out of up to $10.5m, a minimum of 15% of which would be settled in cash and up to 85% by the issue of additional consideration shares at the prevailing market price.

The placing would comprise the issue of 46,153,847 new ordinary shares at a price of 52p per share - a 10.3% discount to the closing middle market price of 58p on 13 March, the last business day before trading in the shares was suspended pending an announcement regarding a reverse takeover.

CentralNic said the acquisition constituted a reverse takeover under the AIM Rules, and was therefore conditional on obtaining shareholder approval at a general meeting scheduled for 1 August.

At the general meeting, a number of other resolutions would be proposed, which would include resolutions to authorise the issue of the placing shares and the consideration shares.

“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,” said chief executive officer Ben Crawford.

“KeyDrive's values and reputation within the industry match CentralNic's.”

Crawford said the acquisition would make “strong strategic sense” to CentralNic, and was a leap forward towards becoming a global leader.

“I am looking forward to welcoming the management and employees of KeyDrive to the CentralNic Group.

“Alex Siffrin will add further weight and industry expertise to the company's management team as group chief operating officer, and having taken a significant equity stake as part of the deal, clearly shares our confidence in the prospects of the enlarged group.”