Fadi Chehadé is still on Donuts’ board.
Top level domain name company Donuts announced last month that it is acquiring Afilias. Later this week, ICANN’s board of directors will consider a change of control request for Afilias.
As Kevin Murphy of DomainIncite wrote in a post yesterday, it’s unusual for ICANN’s board to be consulted about a registry change of control; it hasn’t been consulted on previous takeovers including GoDaddy’s acquisition of Neustar’s registry business this year. ICANN’s board only got involved in a decision over .org due to outside pressure.
Two plausible explanations for the board’s interest in this deal lead back to former ICANN CEO Fadi Chehadé.
Private equity company Abry Partners acquired a majority interest in Donuts in 2018. At that time, Chehadé was working with Abry Partners and helped lead the deal to acquire Donuts along with Erik Brooks, who was a Managing Partner at Abry.
Chehadé took a board seat with Donuts as part of the deal. I’ve confirmed that he is still on Donuts’ board, which could be enough to cause ICANN’s board to review the Afilias acquisition given conflict of interest concerns. It makes sense that the ICANN board would want to publicly review a transaction connected to its former CEO.
But a source told me they believe there’s more to the Donuts-buys-Afilias story than a simple acquisition. The source believes Ethos Capital is investing in Donuts.
I have not been able to independently confirm a transaction involving Ethos. When asked for comment, Donuts CEO Akram Atallah said that the company doesn’t comment on speculation or Donuts’ M&A activities generally.
But it would make sense for Ethos to acquire or invest in Donuts.
Both Chehadé and Brooks left Abry last year to form Ethos Capital, ostensibly with a primary goal of acquiring Public Interest Registry, which manages .org. (Ethos Capital invested in other companies, but recently removed a list of investments from its website.)
ICANN nixed Ethos’ acquisition of Public Interest Registry when it faced pressure about the for-profit takeover of a non-profit registry.
Ethos was likely left with lots of dry powder and investors interested in putting money to work in the domain name business. Ethos must have been contacted when Afilias was shopped this year.
Also, Donuts likely required additional funding to close the Afilias deal. That could come from Abry Partners; its website still lists Donuts as a current investment.
But it would also make sense for Ethos to acquire both Donuts and Afilias, or to invest in Donuts to help close the deal.
Regardless, it seems likely that the ICANN board review is related to Chehadé’s involvement. I don’t expect the same controversy as the .org transaction, but it makes sense for ICANN to dot the i’s and cross the t’s.