Zoom Five9 acquisition collapses after shareholders reject it

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The videoconferencing giant

Focus on video communications

and cloud-based contact center software company

Five9

have agreed to terminate their merger deal, the companies said Thursday afternoon. The merger did not receive enough votes from Five9 shareholders, according to the companies, and the company will continue to operate as a stand-alone listed company.

“The contact center market remains a strategic priority for Zoom, and we are confident in our ability to seize its growth potential,” Eric Yuan, CEO and founder of Zoom, said in a statement. He notes that the company will launch its cloud-based contact center solution, the Zoom Video Engagement Center, in early 2022. The company will also maintain its existing contact center partnerships with companies such as Five9, Genesys, NICE inContact. , Talkdesk and

Twilio
.

Zoom (ticker: ZM) first announced plans to acquire Five9 (FIVN) for $ 14.7 billion in an all-equity deal in July. This move was designed to help the company become a major player in call center software.

Zoom saw an astonishing growth in user numbers during the pandemic as millions of people were locked in their homes and had to communicate virtually with their family and work. The stock jumped 402% from March to mid-October 2020.

However, as the world begins to move past the pandemic, the video conferencing company is expected to experience much lower growth and it may struggle to keep its share price high. To continue to grow its business, Zoom has added new offerings such as cloud-based telephony services. In a presentation to analysts on the Five9 deal, Zoom said it would increase the company’s total addressable market by $ 24 billion.

But the deal ran into trouble two weeks ago as

Institutional shareholder services
,

a proxy analysis firm, advised Five9 shareholders to reject Zoom’s offer. ISS warned that the deal would expose current Five9 investors to more volatile stock with weak growth prospects.

The acquisition received another heavy blow last week as the Justice Department said it believed the deal could pose a national security risk due to the foreign participation associated with the license application. The Justice Department said a special committee would investigate the concerns and asked the FCC to put its own decision on hold until after the review.

Zoom stock has fallen 28% since the deal was announced, while Five9 stock has slipped 10%.

Write to Evie Liu at [email protected]