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VAR Pomeroy To Go Private In New Merger Deal

Pomeroy signed an agreement to be acquired by Platinum Equity in a bid to go private, and in the process cancelled an agreement it signed earlier this year to be acquired by the company's founder.

Pomeroy, a Hebron, Ky.-based solution provider, in May signed an agreement with Hebron LLC, a private equity firm belonging to David Pomeroy, the company's founder. That agreement, signed in May, valued Pomeroy at $5.02 per share, or $46 million. Hebron later raised its bid to $6 per share.

Platinum Equity in September raised the bidding to $6.50 per share, giving Pomeroy a value of nearly $61 million.

As a result of the agreement with Platinum Equity, Pomeroy paid a termination fee of about $1 million to Hebron for breaking its previous merger agreement.

The decision to go private carries a number of advantages, said Christopher Froman, president and CEO of Pomeroy.

"It offers a lot of liquidity to the shareholders, and more flexibility to management," Froman said. "And it saves us a lot of money. A company our size doesn't need to be public."

Froman, who joined Pomeroy in December of 2007 as the head of sales and marketing and who took over as president and CEO early this year, said Pomeroy has made a lot of progress in the past couple of years in terms of building a profitable business.

About 60 percent of the company's business comes from products, and 40 percent from services, Froman said. However, the company's services business margins have grown to reach over 25 percent in the second quarter of 2009, up from about 15 percent in the first quarter of 2008.

Pomeroy has also recently taken a couple other big steps to increase profitability.

The big step was a move last year to exit some unfavorable contracts related to large staff augmentation agreements with a large customer that were on unfavorable terms and offered low margins to the solution provider, Froman said.

"When we exited those contracts, it hit our top-line revenue," he said. "But it freed up about $20 million in capital."

Pomeroy returned to profitability in the second quarter of 2009, which was the company's fifth straight quarter of positive EBITDA (earnings before interest, taxes, depreciation, and amortization), Froman said.

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