Zoom and Five9 abandon $ 14.7 billion acquisition

Cloud contact center software company Five9 and video calling software maker Zoom said on Thursday they would not go ahead with Zoom’s plan to acquire Five9 for $ 14.7 billion .

Five9 shares fell 2% in extended trading following the companies’ statement, which said the acquisition did not receive enough votes from Five9 shareholders.

A branch of the US Department of Justice was reviewing the deal for fear of possible foreign participation, according to a letter dated Aug. 27 sent to the Federal Communications Commission. But Zoom said last week, when news of the review broke, that he still expected the deal to be done in the first half of 2022.

Zoom went public just two years ago, and the coronavirus pandemic has brought the company many new customers and huge profits. It had $ 1.9 billion in cash and cash equivalents on its balance sheet at the end of July.

Zoom announced plans to buy Five9 on July 19, marking the company’s first attempt to spend more than $ 1 billion on a transaction. It was the third-largest tech deal announced this year, behind Microsoft-Nuance, at $ 19.7 billion including debt, and Square’s deal to buy Afterpay in Australia for $ 29 billion, which represents a 30% premium. On July 27, when Five9 released its quarterly results, the company declined to release quarterly or annual forecasts as a result of the then-ongoing deal.

While some important technology acquisitions, especially in the semiconductor industry, have recently been scuttled by regulators, it is highly unusual for companies to voluntarily terminate their own deal.

Proxy advisory firm Institutional Shareholder Services had recommended that shareholders vote against the proposal, CNBC reported on September 17.

One problem for Five9 shareholders could have been the small premium that Zoom had to pay. At the agreed price, Five9 shareholders were only going to receive a 13% increase in the value of their shares from where they traded before the deal. Given the rise of cloud software and all the money investors put into Five9 peers, a significantly higher premium was likely needed to rally shareholders.

The two companies will maintain support for their product integrations, the statement said.

This is last minute news. Please check for updates.

– CNBC’s Ari Levy contributed to this report.