Carlyle Group, the world’s second-largest private-equity firm, agreed to pay about $2.6 billion to take Syniverse Holdings Inc. private, in its second telecommunications buyout in as many days.
Carlyle is offering investors $31 a share in cash, Syniverse said today in a statement. That’s a 30 percent premium to yesterday’s closing price for the Tampa, Florida-based company, which makes mobile-phone messaging and network technology.
The telecommunications-gear industry, where many companies were hit with spending cuts amid a global recession last year, is rebounding as demand for mobile data services and network equipment increases. Yesterday, Washington-based Carlyle agreed to pay $3.9 billion for fiber-optic cable maker CommScope Inc. to take advantage of demand for high-speed networks.
Private-equity firms are attracted to the industry because of the “explosive, accelerating usage of mobile Internet devices,” said John Bright, an analyst with Avondale Partners in Nashville, Tennessee, who rates Syniverse shares “market perform” and doesn’t own any.
Other companies that may become targets include NeuStar Inc. and VeriSign Inc. because of their businesses that are related to mobile devices, Bright said. NeuStar spokesman Allen Goldberg declined to comment, and VeriSign representatives didn’t return a call seeking comment.
Syniverse jumped $6.71, or 28 percent, to $30.50 in New York Stock Exchange composite trading at 4 p.m. The stock has gained 74 percent this year. NeuStar rose 21 cents to $24.88. VeriSign added 18 cents to $33.45 on the Nasdaq Stock Market.
Syniverse reported lower sales and profit in 2009. The company agreed to buy VeriSign’s messaging business last year to help it tap into the growth in data plan use and texting for wireless carriers.
Carlyle is paying investors about 11.4 times Syniverse’s earnings before interest, taxes, depreciation and amortization. That’s in line with the median Ebitda multiple of 11 that similar deals have commanded in the past nine years, according to Bloomberg data.
Carlyle co-founder David Rubenstein said this month that private-equity firms will target deals between $3 billion and $7 billion in size, eschewing larger acquisitions in favor of more manageable buyouts.
Debt, Equity Financing
The telecommunications industry’s history of turbulence, caused by shifting technologies, changing regulations and cyclical demand, has lead to a “false pessimism that is causing people to overlook real value in these markets,” James Attwood, head of the telecommunications and media group at Carlyle, said on the company’s website.
The average premium for a telecommunications company, in deals valued at $1 billion or more, was 30.5 percent during the past two years, according to Bloomberg data. Carlyle said the purchase price is 35 percent higher than Syniverse’s average closing share price in the past 30 days.
Syniverse board has unanimously approved the deal, which must still be ratified by investors and regulators, the companies said. Barclays Plc and Credit Suisse Group AG provided debt funding, while Carlyle will draw on its $13.7 billion buyout fund for equity. The deal is expected to close in the first quarter of 2011.
Private-equity firms pool money from investors and obtain debt to finance takeovers with the intention of selling the companies later for a profit.
Deutsche Bank AG was Syniverse’s financial adviser while Evercore Partners Inc., Barclays and Credit Suisse worked for Carlyle.