Donuts to buy Rightside for $213 million: First take

Deal saves Rightside from the public markets and challenged growth trajectory.

Top level domain name firm Donuts has agreed to acquire competitor Rightside (NASDAQ: NAME) for $213 million, Rightside disclosed today.

The deal will give Donuts an additional 40 top level domain names, Rightside’s technical registry system (that right now powers Donuts’ domains), domain name registrar Name.com, and a portfolio of regarding 300,000 (mostly .com) domain names.

The $10.60-per-share offer is regarding 8% higher than the closing price yesterday, and a 12% premium over the average trading price of the past 30 days.

When looking at the valuation, it’s also notable to think regarding Rightside’s cash component. It had $70 million in the bank at the end of March thanks to its sale of eNom to Tucows. Still, it has spent some of that money on share buybacks since then.

Donuts offered to buy Rightside’s fresh TLD business for $70 million regarding a year ago.

It will be interesting to see if Donuts decides to retain the retail registrar Name.com and what it does with the portfolio of owned and operated domains. While Donuts has been a pure-play registry to date, it inserted a fresh CEO earlier this year.

Rightside will need 50% of shareholders to approve the deal. One that won’t be happy with the price is J. Carlo Cannell, but he owns less than 10% of shares.

I’ve been saying for a while that Rightside is too modest to remain a public firm following selling eNom. Additionally, the firm has bet on fresh top level domain names but hasn’t been able to move the lever on registry revenue. These factors, combined with lumpy aftermarket revenue, put the firm in an awkward spot. Going private through a buyout such as this is its best option.

The deal ought to close in Q3.