Zoom and cloud firm Five9 drop $ 14.7 billion deal

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Zoom Video Communications’ offer to buy cloud software provider Five9 collapsed just weeks after the US Department of Justice raised national security concerns over the $ 14.7 billion deal. dollars and that shareholders were asked to vote against the takeover by a powerful proxy group.

The companies announced on Thursday that they had decided to end their agreement after a shareholders’ meeting organized by Five9 during which a majority of investors declared themselves against the agreement.

“We have had the opportunity to engage in depth with our shareholders since announcing our transaction. We greatly appreciate their feedback and confidence in Five9’s future prospects and share their views regarding the significant potential for value creation as a stand-alone business, ”said Rowan Trollope, Managing Director of Five9.

The decision to end the buyout is a blow to Zoom, which hopes to expand its offering following the huge success of its video conferencing services during the pandemic. The deal with Five9 would have been his biggest acquisition to date, but has been marred by a troubled stock price and regulatory issues.

Earlier this month, the DoJ suggested that Zoom’s ties to China needed further investigation before a deal could be approved.

Zoom relies on a large base of China-based developers, which U.S. officials have long been concerned about, fearing it could compromise the security of the video communications company’s services.

The San Jose, Calif., Based company has repeatedly said that none of its customers’ data travels through China-based servers, although it admitted last year that it mistakenly routed some calls through the China.

Zoom Managing Director Eric Yuan wrote in a blog post that Five9 “presented an attractive way to bring our customers an integrated contact center offering,” but “this was by no means fundamental to the success of our platform and it was not the only way for us to offer our customers a compelling contact center solution ”.

The all-stock transaction announced in July initially valued the Five9 shares at $ 200.28 each, with investors expected to receive 0.5533 Class A common shares of Zoom. However, Zoom’s share price has since declined by 26% over concerns that the popularity of its video conferencing service will wane as workers return to the office.

Earlier this month, proxy advisory firm Institutional Shareholder Services raised concerns over Zoom’s growth and advised Five9 shareholders to vote against the deal.

In a separate announcement, Five9 said it will host a virtual financial analysts day on November 18 to discuss its outlook and strategy.

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