Vonage Holdings Agrees To Buy Nexmo for $230 Million In Cash And Stock

Vonage Holdings Corp. VG struck a definitive deal to acquire privately-held Nexmo, Inc. for $230 million in cash and stock. The company believes that Nexmo's leadership position in the Communications Platform as a Service (CPaaS) segment of the Cloud Communications market would help it significantly.

Vonage Holdings said this acquisition would accelerate its growth strategy, deepened its technology capability and elevated its leadership position in Cloud Communications. The company added that Nexmo was the world's second biggest CPaaS firm as measured by revenues and fits well with its thinking.

According to the agreement, Nexmo shareholders would get $230 million, with an additional earn-out opportunity of a maximum of $20 million subject to Nexmo hitting some performance targets. The company added that $195 million would be paid at close, consisting of a minimum of $159 million of cash and a maximum of $36 million in stock.

Vonage said it might elect at close to substitute $23 million of additional cash for stock and the balance $35 million of the $230 million purchase price was in the form of restricted cash and restricted stock for Nexmo management and employees. The company believes that this structure would offer long-term incentives and retention value for Nexmo management significantly. The earn-out opportunity was payable in cash or stock at Vonage's election.

The company's CEO, Alan Masarek, commented, "In 2014, we set out on a mission to become the clear leader in Cloud Communications for business. With the acquisition of Nexmo, we are now uniquely positioned to lead the market. By combining Vonage's rapidly growing Unified Communications as a Service ("UCaaS") business, with Nexmo, the second largest player in CPaaS, we are creating the future of Cloud Communications. These companies represent a set of strategic, technology and human resources assets that deliver the broadest services offering in our industry."

Research firm, IDC expects CPaaS to reach $8 billion by the year 2018.

Shares of the company traded 6.83 percent lower on Thursday.