Paetec To Acquire VAR500 Staple Xeta Technologies


Paetec Holding Corp. has signed a definitive agreement to acquire Xeta Technologies, one of the top Avaya and networking VARs in the midwest. The cash deal, valued at about $61 million, will bring Xeta's organization into Paetec's managed services portfolio.

Xeta, based in Broken Arrow, Okla., was founded in 1981. Like Paetec, Xeta is an Avaya Platinum Partner and also brings to Paetec the highest-level accreditations with Nortel, whose enterprise business unit Avaya acquired in 2009.

Xeta, ranked No. 306 on the 2010 VAR 500 listing, reported $85.7 million for its fiscal 2010, ended Oct. 31. It expects to generate about $100 million in revenue for its fiscal 2011.

"This transaction highlights our strategy to increase our capabilities to service enterprise CIOs beyond traditional telecom products with advanced managed services and cloud computing solutions," said Arunas A. Chesonis, chairman and CEO of Paetec, in a statement.

The companies complement in their services offerings, Chesonis noted.

"Paetec and Xeta have a consistent national footprint and customer base while offering complementary services. As a result of this transaction and combined portfolios, both companies will have stronger value propositions for our customers," he said.

Under the terms of the agreement, Xeta becomes an indirect, wholly-owned subsidiary of Paetec, and Paetec expects to have about 5,100 employees nationwide.

According to a statement from Paetec, the transaction is expected to close within three months. Paetec's managed services lineup includes hosted services, lifecyle management and Allworx IP-PBX products.

Xeta itself has been in acquisition mode as of late, having bought several fellow Avaya and Nortel VARs in the past two years.

"After a thorough review of our strategic alternatives, our Board of Directors has unanimously determined that this transaction provides Xeta shareholders a superior and certain value," said Greg Forrest, Xeta's president and CEO, in a statement. "We have a 30-year history of delivering best-in-class services to our customers. With the expanded scale and scope of Paetec, the value proposition to our customers, vendors and business partners has never been stronger."

Paetec has been part of a wave of M&A activity in the telecom service provider space. Paetec in September announced a deal to acquire Cavalier Telephone Corp., a regional rival, for $460 million.