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Melbourne IT sells most of self to the US

Melbourne IT has sold its Digital Brand Services division to US-based Corporation Services Company for $152.5 million, nearly as much as the whole company is worth.

Melbourne IT’s Digital Brand Services (DBS) division provides online brand protection and consultancy services to “large global organisations seeking to maximise the value of their online assets.” The division was created in 2008 when Melbourne IT combined its Corporate Brand Services division with the Verisign DBMS business which the company had acquired for US$50 million ($48 million).

Melbourne IT Chairman Simon Jones said the agreed sale price of $152.5 million for DBS illustrates a significant growth in value of the business over the past four years, and represents a valuation of 16 times last years’ earnings of $9.5 million.

The amount is equivalent to 95% of Melbourne IT’s market capitalisation before the sale, which Jones says achieves the board’s stated objective of its recent strategic review to “unlock shareholder value by realising the intrinsic value of its businesses.”

$15 million of the A$152.5 million purchase price will be held in escrow for 15 months to cover capital gains tax liabilities, transaction and other associated costs, and other sale related adjustments. “Total returns are expected to be in the order of A$135-140  million, said Jones. “After retiring outstanding debt of US$35 million, Melbourne IT will consider a range of capital management options as a result of the sale.

“The sale of DBS is a substantial result for shareholders. It is almost equivalent to Melbourne IT’s current market capitalisation, and represents a strong multiple of earnings relative to other recent transactions for this type of business. While this was not a business that we had specifically earmarked for sale, given the value creation provided by the transaction, this was an opportunity which could not be ignored.

“Management and the board are now concentrating on updating the strategic plan for the business following the divestiture so we can provide clarity to shareholders before the AGM in May. We are confident that Melbourne IT’s remaining business divisions will benefit significantly from the arrival of new gTLDs (global top level domain names) and the completion of our transformation program.”

Corporation Service Company is not to be confused with the other CSC, the IT services company formerly known as Computer Sciences Corporation. This CSC was founded in 1899 as a legal and financial services company, and is a large ICANN domain name registrar.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.