New York-based Fusion Telecommunications International (Nasdaq FSNN), large-scale provider of cloud solutions for small, medium and large businesses, etched a path to a larger footprint this week.
Fusion announced that it entered into a definitive agreement to acquire the cloud and business services customers, operations and infrastructure of Atlanta-based Birch Communications, a privately-held company, for $280 million on Aug. 28 in an all-stock transaction. The combined operations will have a value of about $950 million, Reuters reported. ChannelE2E reported rumors about the deal earlier this week.
Birch shareholders will exchange their equity position for approximately 73 million common shares of Fusion, with a value of $3.85 per share. This is a value twice the prior day’s closing price of the Aug. 28 deal.
Gaining Scale
The combined operations will encompass 150,000 business customers throughout the U.S. and Canada and a 100 percent Internet-protocol-based network containing 30 data centers, 31,000 fiber route miles of network and metro fiber assets in 11 large markets, according to a press release from the company.
"This acquisition is a major milestone in Fusion's targeted and disruptive strategy of becoming the leading single-source cloud services provider to business and enterprise customers," said Matthew Rosen, Fusion's chief executive officer, in a press release.
Rosen will continue in his role after the company fuses. He will also assume the role of chairman of the board upon the transaction’s closing.
The deal is expected to close by the end of the year, though it’s still subject to approvals and closing conditions. It did not include Birch’s consumer of single-line business customers, according to the release.
Fusion shareholders will own 25 percent of the combined company, with Birch shareholders owning 75 percent, a release from the Fusion stated.
Once the deal is closed, Fusion is expected to be one of the largest cloud services providers in North America, according to a press release from the company.
Dollars and Cents
With the deal, Fusion is assuming $458 million of Birch’s debt, along with its own $101 million, which the company is expected to refinance together.
Fusion’s annual combined revenue had a face value of $575 million—four times the annual revenue of Fusion’s revenue in 2016 of more than $122 million, according to information in a Securities and Exchange Commission filing.
Fusion also reported a net loss of more than $12.7 million for 2016 and the first half of 2017 didn’t look any better. Its revenue for the first half of 2017 was nearly $74 million, which was higher than the first six months of 2016 at nearly $65 million.
The new loss on both of those periods was $5.2 million and more than $6.4 million, respectively.
