Private equity behemoth Apollo Global Management has agreed to purchase telecom service provider West Corp in hopes of capitalizing on customer migration to cloud-based solutions.
New York-based Apollo has agreed to acquire Omaha, Neb.-based West Corp, No. 23 on the CRN Solution Provider 500, for $23.50 per share, or $0.61 (2.5%) below the company's current trading price of $24.11 per share. The offer represents a premium of 17.5 percent over West's closing price on Nov. 1, the day before the company announced plans to explore strategic alternatives.
The proposed deal has an enterprise value of roughly $5.1 billion, a calculation that includes West Corp's net debt of more than $3 billion. Shareholders owning some 45 percent of West's outstanding common stock have already committed to voting in favor of the deal, according to West.
"Over the past six months, we have evaluated a wide range of strategic and financial alternatives, including the sale or separation of assets; various balance sheet options; as well as continuing to operate under our current structure," Tom Barker, West Corp's chairman and CEO, said in a statement. "We believe strongly that the transaction we are announcing today in the best outcome."
The transaction is expected to close in the second half of the year, and is subject to approval by West's stockholders, the U.S. Federal Communications Commission, and other state and foreign regulators, according to West. The deal will return West Corp to being privately-held, which the company also was from 2006 to 2013 under the stewardship of Thomas H. Lee Partners and Quadrangle Group.
"We are extremely excited for our funds to acquire West," Matthew Nord, a senior partner at Apollo, said in a statement. "West is the leader in global conferencing and collaboration services, and is well-positioned to capitalize on customer migration to cloud-based solutions and continue to grow its Safety Services, Interactive Services and Health Advocate Solutions businesses."
West Corp and Apollo both declined to comment beyond the prepared remarks. West Corp agreed to immediately suspend payment of its quarterly dividend, and has cancelled its earnings conference call scheduled for Wednesday morning.
The deal also gets Apollo Global Management back into the IT services space, which it exited in March when New York-based Presidio, No. 22 on the CRN SP 500, began trading on the Nasdaq stock exchange. Apollo acquired Presidio in December 2014, and the company filed for an initial public offering 23 months later.
The West Corp. acquisition comes just three months after private equity goliath KKR & Co. scooped up Optiv Security, No. 25 on the CRN SP 500, for a reported $2 billion. Apollo also led a group of investors who purchased San Antonio-based public cloud pioneer Rackspace for $4.3 billion in August 2016.
Barker said that West Corp is seeing disparate trends in its various businesses, which was reflected in the company's first-quarter results reported Tuesday. More than 60 percent of the company's business came from its unified communications and telecom practices, which saw sales drop to $351.1 million, down 3.2 percent from $362.7 million last year due to lower revenue in conferencing.