Eric Yuan, founder and chief executive officer of Zoom Video Communications Inc., speaks during the BoxWorks 2019 Conference at the Moscone Center in San Francisco, California, U.S., on Thursday, Oct. 3, 2019.
Michael Short | Bloomberg | Getty Images
Cloud contact center software company Five9 and video calling software maker Zoom said Thursday they will not go forward with Zoom’s plan to acquire Five9 for $14.7 billion.
Five9 shares fell 2% in extended trading following the statement from the companies, which said the acquisition didn’t receive enough votes from Five9 shareholders.
A branch of the U.S. Department of Justice was reviewing the deal out of concern of potential foreign participation, according to a letter dated Aug. 27, that was sent to the Federal Communications Commission. But Zoom said last week, when news of the review was reported, that it still expected the deal to close in the first half of 2022.
Zoom went public just two years ago, and the coronavirus pandemic brought the company many new customers and considerable profit. It had $1.9 billion in cash and equivalents on its balance sheet at the end of July.
Zoom announced its intent to buy Five9 on July 19, marking the company’s first attempt to spend over $1 billion on a transaction. It was the third-biggest tech deal announced this year, behind Microsoft-Nuance, at $19.7 billion including debt, and Square’s agreement to buy Australia’s Afterpay for $29 billion, which amounted to a 30% premium. On July 27, when Five9 reported its quarterly results, the company declined to issue quarterly or full-year guidance as a result of the then-pending deal.
While some large tech acquisitions, most notably in the semiconductor industry, have been scuttled of late by regulators, it’s highly unusual for companies to willingly terminate their own deal.
Proxy advisory company Institutional Shareholder Services had recommended shareholders vote down the proposal, CNBC reported on Sept. 17.
One issue for Five9 shareholders might have been the small premium that Zoom was set to pay. At the agreed upon price, Five9 shareholders were only going to receive a 13% bump in the value of their shares over where they were trading prior to the agreement. Given the momentum in cloud software and all of the money investors have been pouring into Five9’s peers, a significantly higher premium was likely needed to get shareholders on board.
The two companies will maintain support for integrations of their products, according to the statement.
This is breaking news. Please check back for updates.
— CNBC’s Ari Levy contributed to this report.