Ausregistry/Neustar sold to US & Singapore private equity

Neustar Inc (NSR.N), which helps telephone carriers route calls and text messages, said it would be taken private by an investment group led by private equity firm Golden Gate Capital in a deal valued at about $2.9 billion, including debt.

Neustar's shares were up about 20 percent at $33.30 in premarket trading on Wednesday, slightly below the offer price of $33.50 per share.

The equity value of the all-cash deal is about $1.85 billion, Neustar said.

San Francisco-based Golden Gate Capital had a stake of about 2.4 million shares in Neustar as of Sept. 30, according to a regulatory filing.

An affiliate of Singapore's sovereign wealth fund GIC Private Ltd will also make an investment and become a minority owner in Neustar, which was formerly a part of Lockheed Martin Corp (LMT.N).

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http://www.reuters.com/article/us-neustar-m-a-golden-gate-idUSKBN1431J8

The usual modus operandi here is strip off assets, pay out cash to new owners and take on a whole lot of debt. You can see what happens when it all goes wrong though,

Bankrupt Orchard Brands Corp. subsidiaries sued various Golden Gate Capital Corp. funds Wednesday in Delaware, seeking to claw back a $310 million special dividend that allegedly helped cast the retailer into insolvency.

The Golden Gate funds, which own a controlling stake in Orchard Brands, paid themselves and their investors the extravagant dividend after orchestrating the retailer’s 2007 leveraged buyout of Blair Corp. that heaped $650 million in secured debt onto the company’s balance sheet, according to a bankruptcy court adversary proceeding filed by the litigation trustee..

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http://www.law360.com/articles/241957/orchard-trustee-sues-golden-gate-over-310m-payout

Good find Paul. I also read some overnight stories on this, and I have been writing this article on Domainer for the past hour.

I believe this news has legal implications on auDA's backflip to enter into exclusive negotiations with "AusRegistry". But I might be wrong.

neddy said:

Good find Paul. I also read some overnight stories on this, and I have been writing this article on Domainer for the past hour.

I believe this news has legal implications on auDA's backflip to enter into exclusive negotiations with "AusRegistry". But I might be wrong.

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Cheers Ned, do you know if they got approval from Auda last time?

I think a key risk here is that private equity is potentially a very different situation to how things are now in terms of risk. I would think it should be a concern also that the Government of Singapore will now have a minority stake in the .au registry.

I'm wondering also where this could potentially end,. In other words the new buyer will be looking at what is worth keeping and what is worth selling. So there is a question mark over who will actually own Ausregistry in a couple of years time.

Sold cheap..$33.50 to private......

snoopy said:

Cheers Ned, do you know if they got approval from Auda last time?

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They did get approval - have a look at Item 9 of the Minutes from June 2015.

Ned posted domainnamewire's commentary before and it is interesting that they are highlighting asset sales as well,

"Among the domain name companies it has acquired are .co and Bombora Technologies(which owns ARI Services)."...................

"Going private is perhaps a better way to deal with the contract fallout than splitting into two publicly traded companies. It also opens up the possibility of divesting some of its assets more easily in the future."

http://domainnamewire.com/2016/12/14/neustar-nsr-go-private-2-9-billion-deal/

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So I'd imagine there is a fairly good chance of Ausregistry being sold again. At this point it is really up to the AUDA board to to whether they are happy for the registry to be passed around like this.

Another issue for AUDA is that whilst they can call "default" if it were sold to an unacceptable party (e.g. say the next buyer is a Chinese sovereign wealth fund). In practice AUDA stated solution looks to be as follows,

auDA is entitled to resume Registry Services in its own capacity for such period until the appointment of a Successor Registry Operator

(From the link ned posted https://www.auda.org.au/pdf/auda-rft2005-part7.pdf )

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Now AUDA can't even put a tender together so I'm pretty sure they do not have the ability to provide registry services I don't think AUDA have any practical ability to call default if they find the new buyer unacceptable.

With nobody even tendering for this is in many years I don't think AUDA would have any ability to appoint a new registry in a short space of time either. No registry has even considered running it because it hasn't been going out to tender. Am I wrong here? Does AUDA have any realistic backup plan if they deem a new buyer to be unacceptable?

So the public goods (Australian domain system) will be vulnerable to foreign private equity.

If I were a director, I'd be getting advice.

Bacon Farmer said:

So the public goods (Australian domain system) will be vulnerable to foreign private equity.

If I were a director, I'd be getting advice.

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Advice is right... they can't say they had not been warned. Besides Australia's Critical Infrastructure being at risk they now also have their own personal risk as Directors to consider perhaps .

Directors insurance does not cover everything especially when a lot of information was available before "wrong" or questionable decisions had been made.

Maybe wise of some recent directors resigning but I'm not sure how far back the "risk" actually goes for former auDA staff or directors.. they also probably need to check their policy and get advice.

Two massive auDA and auDA board stuff ups including their own public announcements. What a failure!

• "Exclusive negotiations with Ausregistry ( Neustar Inc USA) for Registry Tender"
• "Another competing .au extension".... Pushed by Ausregistry / Neustar, some at auDA, some on the board, Melbourne IT etc. This money grab took their eyes of the issues which needed to be fixed.

Solutions

1. International Open Tender / EOI/ RFT for Registry asap.
2. Dept of Communications take over registry and the role of Auda. They can do it and they have the overall responsibility.
auDA contract NOT renewed, Ausregistry / Neustar inc USA contract NOT renewed. 3 month emergency transition implemented. auDA to provide to the Government the current $10 + Million they have sitting in the bank of profits ( made from domain name registrants ) to cover transition costs.
3. The proposed competing .au extension completely cancelled and an announcement made asap.
4. Back up registry plan implemented asap.... but hey there is none after 15 years of auDA and Ausregistry being in their roles!
5. Government Senate oversight committee emergency hearing.
6. Class Action Lawsuit.
7. ACCC investigation.
8. Focus on making the current Australian name space safe secure and the best it can be. This means make .com.au, .net.au etc the best they can be with less red tape, lower pricing, no "close and substantial rules", more globally well known and promoted by auDA and registry and other benefits. Do not "devalue" what we have now by saying B.S. direct .au registrations will improve things. that will create more mess.

Very interesting thread. From a novice like myself all I am taking away from this is .au will be implemented and domain prices will surely skyrocket :S