US committee examines Zoom’s $ 14.7 billion acquisition of Five9

A U.S. government committee is reviewing Zoom’s deal to acquire cloud-based contact center software company Five9 for $ 14.7 billion on national security grounds.

According to a letter dated August 27, the Federal Communications Commission was asked to refer the matter to the Committee for the Assessment of Foreign Participation in the Telecommunications Services Sector in the United States. Attorney General Merrick Garland chairs the committee.

Zoom announced the deal with Five9 in July, marking the video chat company’s first acquisition at more than $ 1 billion. Zoom has appreciated in value during the pandemic and, with technology from Five9, is trying to expand into adjacent markets.

Zoom is based in San Jose, California, and founder and CEO Eric Yuan, originally from China, is a U.S. citizen. The company has a large research and development center in China, and last year House Speaker Nancy Pelosi of California called Zoom a “Chinese entity” in an interview with MSNBC.

“The USDOJ believes that such risk may be increased by the foreign participation (including foreign relations and ownership) associated with the request, and a review by the committee is needed to assess and make an appropriate recommendation on how which the Commission should rule on this request. “Justice Department David Plotinsky wrote in the letter to the FCC.

Zoom still expects the acquisition to be completed in the first half of 2022, a company spokesperson told CNBC in an email.

“We have filed files with the various applicable regulatory agencies, and these approval processes are proceeding as planned,” said the representative. A spokesperson for Five9 declined to comment.

The Wall Street Journal reported on the letter to the FCC earlier Tuesday.

The committee that sent the letter was formalized in 2020 by an executive order from former President Donald Trump. Formerly known as Team Telecom, the committee provides advice to the FCC regarding potential threats to telecommunications networks. It is separate from the Committee on Foreign Investment in the United States (CFIUS), which has blocked Chinese entities from buying American companies.

In its last earnings report in August, Zoom acknowledged that the company could face risks related to Five9’s operations in Russia.

“We will have to manage Five9’s international operations, including engineering personnel and operations in Russia, which may pose regulatory, economic and political risks as well as additional challenges if the relationship between Russia and the United States deteriorate significantly, or if Russia or the United States impose or implement new or strengthened economic sanctions, supply chain restrictions or other restrictions on doing business, ”Zoom said in the report.

Zoom executives said they expect revenue growth of 31% in the current quarter, down from above 300% growth last year. Five9 saw 44% growth in the last quarter.

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