Zoom to acquire call center company Five9 for $14.7 billion in stock

Zoom to acquire call center company Five9 for $14.7 billion in stock

San Francisco, 7/19/2021

Zoom Video Communications late Sunday announced an agreement to buy cloud-based contact center software company Five9 for $14.7 billion in Zoom stock.

The deal is a partial response to how Zoom Video Communications (ticker: ZM) plans to grow its business after its amazing expansion during the pandemic. Zoom has added new offerings to its core video conferencing service – including cloud-based telephony, an app store and new events software – but Zoom’s growth will slow dramatically starting in 2022.

The acquisition of Five9 (FIVN) will immediately make Zoom a major player in the call center software space, where it will compete with companies such as RingCentral (RNG), Vonage (VG) and privately held Genesys.

„We are constantly looking for ways to improve our platform, and the addition of Five9 is a natural fit that will provide even more delight and value to our customers,“ Zoom CEO Eric Yuan said in a statement. „Businesses communicate with their customers primarily through the contact center, and we believe this acquisition will create a leading customer engagement platform that will help redefine how businesses of all sizes engage with their customers.“

Five9 holders will receive 0.5533 Zoom shares for each Five9 share. Based on Zoom’s closing share price Friday, the transaction would value Five9 at $200.28 per share. Five9 shares closed Friday at $177.60.

The transaction is subject to Five9 shareholder approval, various regulatory approvals and other customary closing conditions. The boards of both companies have approved the transaction. The transaction is expected to close in the first half of calendar 2022.

In a research note late Sunday, Piper Sandler analyst James Fish wrote that the deal „makes perfect long-term sense“ and makes Zoom „an even stronger force“ in communications software. However, Fish said he believes Five9 holders will question the relatively low premium for the deal.

Five9 reported revenue of $137.9 million for the March quarter, up 45% from the year-ago quarter. The company posted non-GAAP earnings of $16.1 million, or 23 cents per share; on a GAAP basis, it lost $12.3 million, or 18 cents per share. For full-year 2021, Five9 expects revenue of $548.5 million to $551.5 million and earnings of 89 cents to 93 cents on a non-GAAP basis; on a GAAP basis, the company expects a loss of 87 cents to 91 cents per share.

For the first fiscal quarter ended April 30, Zoom reported revenue of $956.2 million, up 191% from the same period a year ago. For the July quarter, Zoom expects revenue of $985 million to $990 million. For the January 2022 fiscal year, Zoom expects revenue of $3.975 billion to $3.99 billion.