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
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.
CAIS also has long-term agreements to provide Internet access to 575
multi-family communities, providing DSL access to potentially more than
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
“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.