20 September 2016

Minds + Machines Group Limited

("MMX", the "Company" or "Group")

Proposed Tender Offer & Subscription

Further to the interim results announcement for the six months ended 30 June 2016 released earlier today, Minds + Machines Group Limited (AIM: MMX) confirms that it proposes to return capital to shareholders by way of a Tender Offer.

The Board proposes to return up to £13.0 million to shareholders via a Tender Offer at 13 pence per Ordinary Share, a premium of 18.2% to the price of an Ordinary Share at the close of business on 16 September 2016 and a premium of 25.2% to the volume weighted average price of an Ordinary Share for the period 1 July 2016 to 16 September 2016.

Alongside the Tender Offer, the Company announces a private subscription to issue Goldstream Capital Master Fund I with 42,307,692 Ordinary Shares at 13 pence per Ordinary Share for a total consideration of £5.5 million. Goldstream Capital Master Fund I, advised by Goldstream Capital Management Limited, is a private fund incorporated in the Cayman islands which is wholly owned by Hony Capital, a leading Chinese private equity investment company. On issue, Goldstream Capital Master Fund 1 will hold 50,107,692 Ordinary Shares in the Company.

Under the BVI Business Companies Act 2004 and the AIM Rules, the Tender Offer does not require the approval of the Shareholders at a general meeting. A circular is being posted to shareholders later today (the "Circular"), which will also be available on the Company's website http://mmx.co, with further details of the Tender Offer and Subscription.

Further details of the Tender Offer and the Subscription are set out below.

Expected Timetable of Events

Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the Circular.

Further Information:

Minds + Machines Group Limited

Toby Hall (CEO)                                                                    Tel: +44 (0)7713 341072

toby@mmx.co

Michael Salazar (COO/CFO)                                             Tel: +1 (424) 214-7908

michael@mmx.co

finnCap Ltd (Nomad/broker)                                            Tel: +44 (0)20 7220 0500

Stuart Andrews/Carl Holmes/Simon Hicks                   

Tim Redfern

For further information, please go to www.mmx.co

About MMX

Minds + Machines Group Limited (LSE:MMX) is the owner and operator of a world class portfolio of top-level domain assets (gTLDs). As a sales and marketing-led registry business, we are focused on commercializing our portfolio in partnership with our expanding global network of distribution partners.

The MMX portfolio is currently focused around geographic domains (e.g. .london, .boston, .miami, .bayern), professional occupations (e.g. .law, .abogado, and .dds), consumer interests (e.g. .fashion, .wedding, .vip), lifestyle (e.g. .fit, .surf, .yoga), outdoor activities (e.g..fishing, .garden, .horse) and generic names such as .work and .casa. As a business, we work through our expanding international network of registrars and distribution partners to bring the benefits of affinity based domain addresses to B2B and consumer audiences. For more information on MMX, please visit www.mmx.co.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014

The following text has been extracted from the Circular:

1                             INTRODUCTION

1.1          The Board has resolved to offer Shareholders the opportunity to sell back some or (to the extent that other Shareholders tender less than their pro rata entitlement) up to all of their Ordinary Shares to the Company by way of a Tender Offer. In aggregate, the Company shall redeem up to 100,000,000 Ordinary Shares representing 13.22 per cent. of the issued share capital at a price of £0.13 per Ordinary Share and for aggregate consideration of £13,000,000 if the Tender Offer is fully subscribed).

1.2          Furthermore, alongside the Tender Offer the Company has agreed to issue an existing investor, more details of which are set out in paragraph 5 below, with 42,307,692 Ordinary Shares at £0.13 per Ordinary Share (for total consideration of £5,500,000). 

1.3          On the basis the Tender Offer is fully subscribed (and/or greater than 42,307,692 Ordinary Shares are tendered), the Subscription Shares shall comprise 42,307,692 Tendered Shares and the balance of any Tendered Shares redeemed by the Company shall be cancelled.  On the basis the Tender Offer is not fully subscribed, and less than 42,307,692 Ordinary Shares are tendered by Shareholders, the balance of Subscription Shares will be made up of new Ordinary Shares issued by the Company.

1.4          This announcement sets out the background to and reasons for the Tender Offer and Subscription and why the Board has resolved that the Company make the Tender Offer and issue the Subscription Shares.

1.5          Under the Act and the AIM Rules, the Tender Offer does not require the approval at a general meeting of the Shareholders.

1.6          Although Shareholders should take their own tax advice on the implications of the Tender Offer for them, the Directors believe the Tender Offer (as opposed to a cash dividend) is a tax efficient method of returning value to Shareholders.

1.7          Shareholders do not have to accept the Tender Offer. As set out below, the Board of the Company will continue to work to grow the Group operating revenue and profits and put in place a dividend programme that is sustainable and allows for continued investment in the business. Those Shareholders who do not accept the Tender Offer will have a proportionately larger interest in the Issued Share capital of the Company following completion of the Tender Offer and Subscription.

2             CURRENT OPERATIONS AND TRADING OF THE COMPANY

Summary and highlights of Interim Accounts

2.1          On 20 September 2016 the Company released its Interim Results. Shareholders are advised to review the Interim Results in detail concurrent with the Circular as the Interim Results provide the most comprehensive review of the Company's financial performance and trading for the period to 30 June 2016. Set out below is a summary of the operational highlights in the period to 30 June 2016:

·           Billings in H1 of 2016 increased over 300 per cent. to US$8.05 million compared to US$2.0 million for the same period last year, a figure which has been significantly helped by the successful launch into China in the period.

·           Revenues for H1 2016 have more than doubled to US$7.4 million (H1 2015: US$3.6 million).

·           Ongoing operating costs have already been cut 27 per cent. to US$3.6 million (H1 2015 US$4.9 million) in the period with further savings to be realised in H2 as we decrease towards our 2017 target of US$6 million for the year.

·           Gross margin on billings for the period has improved to 86 per cent. compared to 47 per cent. in H1 2015; and

·           Positive operating EBITDA before restructuring costs of US$2.0 million has been delivered versus a loss of US$2.7 million1 for the same period last year*.

·           Cash & cash equivalents have decreased by 16 per cent. to US$29.1 million as of 30 June 2016 from US$34.7 million as of 31 December 2015. This is as a result of:

Ø   Foreign currency fluctuations: the Group holds significant bank balances denominated in Pound Sterling to meet certain, upcoming obligations;

Ø   Share buy-backs: as part of the share buy-back programme initiated in September 2015, the Group spend on share buy-backs was US$1.2 million in H1;

Ø   Share based payments; and

Ø   Discontinued operations and restructuring costs.

·           Analysis of key numbers:

* H1 2015 operating EBITDA profit of US$1.732 million includes one-off profits from gTLD auctions of US$4.460 million

Current Trading and Outlook

2.2          The Directors believe that both the new top-level domain industry as a whole and the Company itself have reached an inflexion point where historic excitement is now being reflected by tangible results and meaningful progress. The growth rates of registrations within new gTLDs, up 114 per cent. to over 24 million in year to date, are visible for all to see and China and the Far East are leading the way. The Directors believe that the Company has demonstrated it can and will continue to play a meaningful role in both China and the Far East and the wider global gTLD market.

2.3          Now restructured as a pure-play sales-led registry, the Directors will continue to streamline the business through cutting costs where necessary and outsourcing operational costs where possible whilst still investing in sales and marketing where appropriate. In addition, historically burdensome partner contracts are now being transitioned onto a commercial footing.

2.4          The Company continues to have interests in eight contested TLDs although many continue to sit within various processes of ICANN. Some are expected to be resolved via a private auction later this year and regardless the Directors will continue to push for these to be resolved so the Company can move forward with the proposed registry plans.

2.5          The Company also continues to negotiate various ICANN processes to complete the acquisition of .boston and expect this to be resolved in H2 2016. Once resolved the Company will begin working on a plan to commercially launch, ensuring that the Company leverages findings from the success of the .vip TLD launch into China.

2.6          The Directors are optimistic for the outcome of the year as a whole and remain excited about the medium and long term prospects for the Company for 2017 and beyond across its three markets of focus: Asia, Europe and the US.

2.7          Following the completion of the Tender Offer and the Subscription, the Company will continue to operate its business in accordance with its current strategy.

3             REASONS FOR THE TENDER OFFER AND SUBSCRIPTION

3.1          On 22 September 2015 the Company announced that the Board had authorised the purchase of up to £15 million of Ordinary Shares on the open market (excluding dealing and associated costs) (the "2015-2016 Share Buy-Back Programme").

3.2          On 13 July 2016 the Company confirmed that the Company had purchased a total of 79,523,368 Ordinary Shares pursuant to the 2015-2016 Share Buy-Back Programme for total consideration of £6,779,011.08.

3.3          On 21 September 2016 the authority granted pursuant to the 2015-2016 Share Buy-Back Programme expired and no further shares will be purchased pursuant to this programme.  Since 13 July 2016 no further Ordinary Shares have been purchased by the Company.  Accordingly, in aggregate a total 79,523,368 Ordinary Shares have been purchased by the Company, and cancelled, and total consideration of £6,779,011.08 has been paid.  A total of £8,220,988.92 of authorised expenditure under the 2015-2016 Share Buy-Back Programme was unutilised.

3.4          As at the date of the Circular the Company has a total of 756,446,117 issued Ordinary Shares.

3.5          Following expiry of the authority under the 2015-2016 Share Buy-Back Programme the Board of Directors have approved the Tender Offer, to continue the policy of returning value to Shareholders.

3.6          Further, the Board have approved the Subscription to:

(a)           support the Tender Offer; and

(b)           allow the Company to make the Tender Offer at a price of £0.13 per Ordinary Share, a premium of 18.2 per cent. to the price of Ordinary Shares on the AIM Market at close of business on 16 September 2016 (and a premium of 25.2 per cent. to the volume weighted average price of an Ordinary Share for the period 1 July 21016 to 16 September 2016).

3.7          As and when prudent to do so, and subject to the continued operational performance of the Company generating distributable profits, following completion of the Tender Offer and Subscription the Board will continue to review strategic options for returning value to Shareholders, whether pursuant to a future share buy-back programme, future tender offer, or pursuant to a special dividend or recurring dividend policy.

4             THE TENDER OFFER

4.1          The terms of the Tender Offer, that all Eligible Shareholders tendering Ordinary Shares, must accept and agree to, are set out at Part Two of the Circular.

5             THE SUBSCRIPTION AND THE RELATIONSHIP AGREEMENT

5.1          Prior to commencement of the Offer Period, on 19 September 2016 the Company executed the Subscription Agreement.  Under the terms of the Subscription Agreement the Subscriber has irrevocably agreed to subscribe for the Subscription Shares at the Subscription Price.

5.2          Goldstream Capital Master Fund I, advised by Goldstream Capital Management Limited, is a private fund incorporated in the Cayman Islands which is wholly owned by Hony Capital, a leading Chinese private equity investment company.

5.3          Following completion of the Subscription, on the basis the Subscriber (and its Associates) do not participate in the Tender Offer, the Subscriber (and its Associates) shall be interested in the following Ordinary Shares:

5.4          On the basis the Tender Offer is fully subscribed, on the basis the Subscriber (and its Associates) do not participate in the Tender Offer, the Subscriber and its Associates shall be interested in 7.17 per cent. of the issued Ordinary Shares of the Company.

The Relationship Agreement

5.5          Following consultation between the Company, the Subscriber and finnCap Ltd, the Company's nominated adviser and broker, the Subscriber and the Company have executed the Relationship Agreement.  Under the terms of the Relationship Agreement the Subscriber and the Company have agreed that, for a period of 18 months from the date of issue of the Subscription Shares the Subscriber shall:

(a)           have the right to participate on a pre-emptive basis in any new issue of Ordinary Shares for cash by the Company;

(b)           not sell (or grant any charge or other right or option to acquire) any of the Subscription Shares other than in accordance with the terms of an agreed lock-in agreement;

(c)           grant the Company a right of first refusal in relation to any proposed sale of the Subscription Shares;

(d)           vote Ordinary Shares in which they are directly or indirectly interested in support of any resolution of Shareholders proposed and recommended by the Board;

(e)           use all reasonable endeavours to notify the Company prior to any further acquisition of Ordinary Shares by any the Subscriber or an Associate;

(f)            seek to support the Company's activity in China and not compete with the Company, solicit its employees or customers or suppliers;

(g)           procure that the Company and the Board shall operate independently of the Subscriber or any of its Associates;

(h)           not seek or have any right to appoint and/or maintain in office any Director  of the Company;

(i)            not make any offer to acquire all of the shares of the Company not in the control of the Subscriber or its Associates ("Offer") unless and until the proposed terms of the Offer have been approved by the Board and which has been agreed in writing to recommend such Offer to all Shareholders; and

(j)            not exercise any of its voting or other rights and powers in relation to Ordinary Shares directly or indirectly held to requisition any general meeting of Shareholders.

6             SIGNIFICANT SHAREHOLDER INTENTIONS

6.1          Prior to proceeding with the Tender Offer and Subscription the Company consulted certain large shareholders.  In particular the Company received the following binding undertakings from Shareholders regarding their participation in the Tender Offer:

* Alphagen Capital Limited, a subsidiary of Henderson Group plc, in its capacity as discretionary investment manager of funds which, as at the date of the Circular, hold, in aggregate 168,606,742 Ordinary Shares.

** Ordinary Shares held by BNP Nominees.

Takeover Offer Obligations under Articles of Association Waived

6.2          Under Regulation 23 of the Company's Articles of Association the Board has the right to require any Shareholder (or any "concert party") interested in greater than 30 per cent. of the issued share capital of the Company from time-to-time, to make an offer for the balance of the Ordinary Shares not in its or their control. For the avoidance of doubt, the Board has irrevocably resolved that no Shareholder breaching the 30 per cent. threshold as a result of completion of the Tender Offer shall be required to make a mandatory bid under the Articles of Association.

7             DIRECTORS' INTENTIONS

7.1          Details of Directors' shareholdings and those of their respective connected persons, and the intentions of the Directors in relation to the Tender Offer,  are set out below:

* Mr Turcan was appointed to the Board of Directors as a nominee director of Alphagen Capital Limited, a subsidiary of Henderson Group plc ("Henderson"). On 19 September 2016 Alphagen Capital Limited in its capacity as discretionary investment manager of funds provided an undertaking to the Company that it will accept the Tender Offer in respect of its Tender Entitlement.  It did not provide any undertaking as to whether it would accept the Tender Offer in respect of Excess Shares. Further details regarding the undertakings received by the Company are set out at paragraph 6 of Part I of the Circular.

8             TAXATION

8.1          No advice is provided regarding taxation. Any Shareholder who is in any doubt as to their tax position should consult an appropriate professional adviser.

9             CLOSING TIME AND RECORD DATE

9.1          Only Eligible Shareholders who hold Ordinary Shares at the Closing Time on the Record Date are eligible to participate in the Tender Offer in respect of those Ordinary Shares so held. Any Shareholder holding shares in certificated form who returns a Form of Acceptance is required to return also the relevant share certificate or a completed letter of indemnity in lieu thereof by the Record Date.

10           OVERSEAS SHAREHOLDERS

10.1        US Shareholders should refer to the Notice to US Shareholders attached to the Circular for instructions on how they can participate in the Tender Offer.

11           NO RECOMMENDATION

11.1        The Directors make no recommendation to Shareholders in relation to whether or not tendering for sale any of their Ordinary Shares pursuant to the Tender Offer is in their best interests. Whether or not Eligible Shareholders decide to tender any of their Ordinary Shares will depend, among other things, on their individual circumstances, including their tax position, and on their view of the Company's prospects, and the management's experience and ability to identify suitable acquisition targets in the future. Shareholders in any doubt as to the action they should take should consult an appropriately qualified independent financial adviser authorised under the Financial Services and Market Act 2000.