Zoom to buy cloud-based call centre operator Five9 in $20 billion deal

Zoom Video Communications Inc has become a household name and investor favorite in the year since the coronavirus pandemic.
Zoom Video Communications Inc has become a household name and investor favorite in the year since the coronavirus pandemic.ST PHOTO: KUA CHEE SIONG

BENGALURU (REUTERS) - Zoom Video Communications announced a US$14.7 billion (S$20 billion) all-stock deal to buy cloud-based call centre operator Five9 Inc in its largest-ever acquisition, as competition intensifies in its core video-conferencing sector.

The teleconferencing services provider has become a household name and investor favorite in the year since the coronavirus pandemic, as businesses and schools adopted its services to hold virtual classes, office meets and socialise.

The San Jose, California-based company is now shifting focus to its two-year-old cloud-calling product Zoom Phone and conference-hosting product Zoom Rooms as bigger players Facebook and Alphabet's Google amp up their video products.

"The acquisition is expected to help enhance Zoom's presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the US$24 billion contact centre market," Zoom said in a statement on Sunday.

The acquisition will complement Zoom Phone service, an alternative to legacy phone offerings, by adding Five9's business customers and combining its contact centre software to optimise customer interactions across channels, it added.

Five9's customers include Under Armour, Lululemon Athletica and Olympus Corp, according to its website.

Five9 will become an operating unit of Zoom and its chief executive Rowan Trollope will become a president of the company, staying on as chief of the unit after the deal, which is expected to close in the first half of 2022, it said.

Under the pact, approved by the boards of both companies, Five9 stockholders will receive 0.5533 shares of Class A common stock of Zoom for each share of Five9, it added.

Based on the July 16 closing share price of Zoom Class A common stock, this represents a price of US$200.28 for each share of Five9 common stock, or nearly a 13 per cent premium, and an implied deal value of about US$14.7 billion.

Shares in Zoom, which went public in 2019, rose 1.4 per cent to US$361.97 on Friday, valuing the company at around US$106 billion.

Zoom rose 45 per cent over the past year, as conferencing platforms, which also include Cisco Systems Inc's Webex and Microsoft Teams, have seen a surge in usage due to the coronavirus pandemic that has spurred a seismic shift to online working, learning and socialising.

Global spending on cloud-based conferencing is forecast to reach US$5.41 billion this year, up from US$5.02 billion in 2020, according to tech consultancy Gartner. It does not track market share, but analysts cite Zoom and Cisco as the leaders.

Goldman Sachs advised Zoom and Qatalyst Partners advised Five9.