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Report: Apollo Global Management In Talks To Buy Telecom Service Provider West Corp For $2B
Private equity powerhouse Apollo Global Management is conducting advanced negotiations to take telecom service provider West Corp private for $2 billion, according to Reuters.
Omaha, Neb.-based West Corp, No. 23 on the CRN Solution Provider 500, announced in November plans to explore financial and strategic alternatives such as the sale or separation of one or more operating businesses, or the sale of the company altogether. The exploration resulted in an auction in which New York-based Apollo ultimately prevailed, Reuters reported.
Apollo's $2 billion acquisition offer came in below West Corp's market capitalization of $2.3 billion, Reuters reported, adding that West Corp's indebtedness of more than $3 billion weighed on the deal negotiations. West Corp. hopes to conclude talks by May 9, Reuters said, when it is scheduled to report first-quarter earnings.
West Corp's stock surged $7.19 (36.5%) to $26.91 per share between the time the company announced its plans to explore strategic alternatives and the initial reports late last week that Apollo had won an auction to buy the company. But West's stock has fallen $2.63 (9.85%) to $24.08 since Reuters reported late Monday that Apollo was trying to convince West Corp to lower its price.
West Corp declined to comment, while Apollo didn't immediately respond to a request for comment. The company announced in November that it had hired New York-based investment bank Centerview Partners LLC and Chicago-based law firm Sidley Austin LLP to assist with the exploration of financial and strategic alternatives.
"As part of our ongoing evaluation of our portfolio of assets, we have decided to engage advisors to help us evaluate possible alternatives and strategies to maximize long-term shareholder value," Tom Barker, West Corp's chairman and CEO, said in a November statement.
Another private equity firm, Veritas Capital, was only interested in buying parts of West Corp's business, the New York Post reported in early April. The Post reported that West Corp set a final bid deadline for the week of April 17 amid lackluster interest.
Private equity firms Thomas H. Lee Partners and Quadrangle Group took West Corp public in March 2013, though they still own 21.5 percent and 4.5 percent stakes in the company, respectively. The same two companies had took West Corp private back in 2006 for $4.1 billion, including debt.
Apollo Global Management first got into the IT services space with its December 2014 purchase of New York-based Presidio, No. 22 on the CRN SP 500. Presidio filed for an initial public offering in November 2016 and began trading on the Nasdaq stock exchange in March.
Apollo also led a group of investors who purchased San Antonio-based public cloud pioneer Rackspace for $4.3 billion in August 2016.
West Corp's 2016 sales grew to $2.29 billion, up 0.5 percent from $2.28 billion in 2015. Net income, though, plummeted to $193.4 million, or $2.29 per diluted share, down 20 percent from $241.8 million, or $2.83 per share, the year prior.
West Corp offers technology that allows businesses and public safety organizations to launch teleconferencing sessions and manage customer service calls. But Reuters said the company has struggled to keep its conferencing technology competitive amid fierce price competition from its peers.
The Post, meanwhile, reported that the technology used by customers of West Corp's 911 division is becoming outdated. In addition to a division facilitating 911 calls, the Post said West Corp has a teleconferencing division that counts AT&T as its largest client.
Call center vendors and services firms have been consolidating to gain scale and adapt amid fast technological change and pricing pressure, Reuters said. Call center software provider Genesys Telecommunications Laboratories agreed in August 2016 to acquire fellow call center software maker Interactive Intelligence for $1.4 billion.
West Corp has also been an aggressive buyer of other firms, purchasing Australia-based Vocus Group's cloud collaboration practice in April and enterprise emergency 911 service provider 911 ETC in December. All told, West Corp has carried out 10 acquisitions since 2010 and six acquisitions since 2014.