Vonage's Acquisition of Nexmo is Now Complete
It was just over a month ago when we first heard that Vonage had set out to buy Nexmo, in a deal then valued around $230 million. Even then, we knew such a deal would be subject to the general terms and conditions like shareholder approval, regulatory approval and so on. Now, these hurdles seem to have been surmounted, as the acquisition is now complete.
The $230 million originally stated appears to have gone through, and there's even an additional earn-out opportunity with an extra $20 million at stake dependent on achieving certain performance targets. The payout was made in a mixture of cash and stock--$163 million in cash along with around 6.8 million shares of Vonage common stock with a then-combined value of $32 million—with the balance to be paid with restricted cash and stock held by Nexmo's management, subject to certain vesting requirements. Should the earn-out conditions be met, Vonage can pay those out in either cash or stock.
What's more, Vonage has also been stepping up its plans to buy back shares, with a $100 million program set to take place over the next four years to land such purchases. So far in the year-to-date, Vonage has bought back 7.2 million shares at an average price of around $4.41, spending roughly $32 million in the process. Plus, the company recently closed on a credit facility of around $450 million, suggesting that Vonage has some excellent cash flow on hand and is doing quite well.
Alan Masarek, Vonage's CEO, commented “Nexmo enhances Vonage's UCaaS offering by incorporating messaging and web/app-based voice to address businesses' rapidly increasing mobile, social media and contextual communications needs. Whether helping the world's largest e-commerce platform to provide in-app messaging communications to end users, or enabling a leading global airline to connect its CRM software to chat apps and manage the customer experience, Nexmo is changing the way businesses communicate with their customers.”
Vonage was doing pretty well even before its purchase of Nexmo, as Masarek's comments suggest. With Nexmo on hand, Vonage should be able to expand its gains even further, making it a greater competitive force. The value of voice over Internet protocol (VoIP) service by itself is tough to sneeze at, and with Nexmo's array of application programming interfaces (APIs) and tools for voice and chat operations, Vonage will have several new tools to offer users. That means a greater value for those already in the fold, and a better reason to switch for those outside. Competitors may need to ramp up product development and customer experience features to ensure their own markets remain intact.
Vonage's acquisition of Nexmo could be a game-changer, and with some impressive cash flow to back it up, Vonage could be a power in the field before too much longer.
Edited by Maurice Nagle