Zoom and Five9 terminated the $14.7 billion merger deal after the sharp decline in Zoom’s stock slashed the value of the deal by nearly a third and prompted Five9 shareholders to reject the offer.
In the face of fierce competition, Zoom sought to acquire Five9, a call center software provider, in an all-stock purchase to support its popular video conferencing app. The deal was set to become its first billion-dollar acquisition and the second-biggest tech deal of the year.
Five9 investors were offered 0.5533 shares of Class A common stock of Zoom for each share of Five9, and the deal implied a 12.8% premium over Five9’s market price and valued the company at $14.7 billion, based on Zoom’s closing price of $361.97 on July 16. Since then, Zoom’s stock has dropped 28% and finished at $261.50 on Thursday.
The merger deal “has been terminated by mutual agreement,” Five9 said in a statement. “The agreement did not receive the requisite number of votes from Five9 shareholders to approve the merger with Zoom.”
According to an August 27 letter to the Federal Communications Commission, a branch of the U.S.Department of Justice has reviewed the deal over concerns about possible national security concerns. However, Zoom said last week, when news of the review was reported, that it still expects the deal to be completed in the first half of 2022.
Five9 shares, which have lost 10% since the announcement of the merger deal, fell nearly 1.2% in long-term trading after the termination news, while Zoom shares gained less than 1%.
Zoom CEO Eric Yuan said in a statement that the deal would have provided benefits to shareholders of both companies. Still, “the contact center market remains a strategic priority for Zoom, and we are confident in our ability to capture its growth potential,” he said.