CAIS Internet Lands $200 Million for Expansion
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High-speed Internet access provider CAIS Internet Inc. Tuesday announced buyout firm Kohlberg Kravis Roberts & Co. is investing up to $200 million over next two years.
KKR will make an initial investment of $100 million investment in the form of convertible preferred stock valued at $16.50 per share. The agreement also includes a one-year option for the private investment firm to purchase an additional $100 million of convertible preferred stock with a conversion price of $20 per share.
If KKR exercises their option the firm's investment would represent a 26.4 percent stake in CAIS Internet (CAIS). As a result of its investment, KKR will have two of eight seats on CAIS Internet's board. KKR would add a third seat if they exercise the option.
CAIS currently has agreements in place to be the exclusive provider of high-speed Internet access to more than 9,000 hotels worldwide. The deals mean that CAIS Internet access may serve high-speed Digital Subscriber Liner access to more than one million rooms throughout the world.
Ulysses G. Auger II, CAIS chief executive officer, said KKR's investment in CAIS is a validation of their multiple-user business model to provide high-speed access in hotels, motels, airports and multi-unit dwellings.
"KKR is discerning in its investments, and its relationship with CAIS represents the perfect marriage between traditional strategic financial capital and the new online economy," Auger said. "We are fortunate to be partnering with a firm with significant experience in the communications industry as well as with substantial access to investment capital."
Auger added that the financial infusion would help the firm accelerate their expansion plans.
"KKR's investment will enable us to ramp up our growth plans in the hospitality and apartment markets, both of which offer accelerating opportunities for our patented, simultaneous telephone and high speed Internet access solutions," Auger said.
James H. Greene, Jr., KKR partner, said the CAIS investment is an example of the investment firm's focus on rapidly growing segments within the communications industry.
"CAIS is well positioned to provide faster, more cost effective Internet access and enhanced Internet services," Greene said. "We believe that CAIS has all the ingredients for significant value creation; an expanding customer base, exclusive long-term contracts, patented technology and, most important, a strong management team."
During 1999, CAIS has signed a number of exclusive long-term contracts to provide turnkey broadband access and portal content solutions to hotels and apartment buildings. Most recently CAIS signed a multi-year contract with Prime Hospitality, which includes the AmeriSuites and Wellesley Inn & Suites brands. Many of these hotels also plan to carry CAIS meeting room and kiosk Internet access solutions.