Neustar, Inc., a neutral provider of real-time information services, has not found a superior deal in the permitted 30-day window, and has agreed to be acquired by a private investment group.
The group is led by Golden Gate Capital and the transaction is valued at approximately US$2.9 billion. The price includes debt to be refinanced.
Under the terms of the agreement, unanimously approved by Neustar’s Board of Directors, the Sterling, Virginia-based company’s shareholders will receive $33.50 per share in cash, a premium of 45% to the closing price prior to Golden Gate Capital’s declaration of an equity position in Neustar.
“We are pleased to have reached this agreement, which will deliver certain and immediate value to our shareholders,” said James Cullen, chairman of Neustar’s Board, says Jeremy Cowan, editorial director & publisher of IoT Now, IoT Global Network, and VanillaPlus.
A case study issued by Glendale, California-based investment bankers and financial advisors, Peter A Sokoloff & Co., said that since the beginning of 2011, Neustar has been implementing a plan to leverage its position in Order & Inventory Management and real-time Numbering Services.
The world generates roughly 2.5 quadrillion bits of data every day. Neustar isolates certain elements and analyses, simplifies and edits them.
As one of the few companies capable of knowing with certainty who is on the other end of every interaction, Neustar aims to help marketers send timely and relevant messages to the right people, and says it is trusted by its 12,000 clients to make critical decisions 20 billion times a day.
“Because we can authoritatively tell a client exactly who is calling or connecting with them,” says Neustar’s publicity, “we make critical real-time responses possible. And the same comprehensive information that enables our clients to direct and manage orders also stops attackers. We know when someone isn’t who they claim to be, which helps stop fraud and denial of service before they’re a problem.”
The problem, as Sokoloff describes it, is that Neustar is still embroiled in “a crisis-driven transformation brought about when the FCC (the US Federal Communications Commission) awarded the long-held NPAC (Number Portability Administration Center) contract to Ericsson in 2015. NPAC accounts for almost half of Neustar’s revenues and more than half of its EBITDA (earnings before interest, tax, depreciation and amortisation). The current contract is expected to be fully turned over from NSR to Ericsson’s Telcordia unit in 2018.”
“Losing NPAC was a shock to NSR who held the contract since local (US) number portability was first allowed in 1996,” says Sokoloff. “It is a complex system overseeing some 500 million phone numbers. Under NSR, local number portability became an easy fact of life for consumers, with transfers routinely taking minutes.”
In a worrying aside, Sokoloff says that “many industry insiders” question whether Telcordia will be able to take over NPAC administration without major challenges and delays for consumers.
Either way, “going private is by far the best avenue for Neustar,” Sokoloff analysts comment. “There will be ups and downs ahead as the transformation continues; public investors react poorly to such uncertainties.”
Unsurprisingly, Lisa Hook, Neustar’s president and CEO is bullish about the deal. “We believe this transaction will enable us to continue to execute against our strategy and strengthen our market position as a leader in marketing, risk, security and communication solutions.
Golden Gate Capital and GIC (Government of Singapore Investment Corp) offered us a compelling opportunity to continue to invest and pursue long-term growth with operational flexibility, and we look forward to working with these two sophisticated investors. Importantly, customers, employees and partners will continue to benefit as we execute against our strategy.”
Neustar has capabilities in managing complex datasets and authoritative real-time connectivity, and aims to become a market-leading provider of Information Services. The company has built its market position around unique, hard-to-replicate datasets and the data science that provides authoritative identities, updated in real time. At the same time, the Information Services business has been built independent of the Number Portability Administration Center (NPAC) operations and data.
Rishi Chandna, managing director of Golden Gate Capital said, “We strongly believe in the company’s strategic direction and have been very impressed with the team’s ability to transform the business into both a trusted, neutral provider to the telecom industry and a leading information services provider.”
The transaction, which is expected to close no later than the end of the third quarter of 2017, is subject to approval by Neustar’s shareholders, regulatory approvals and other customary closing conditions. The agreement permitted Neustar to solicit superior proposals from third parties for 30 days, which have now elapsed.
Shares in Neustar closed on Friday, January 27 at $33.08.
The author of this article is Jeremy Cowan, editorial director & publisher of IoT Now, IoT Global Network, and VanillaPlus.
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