Covad Takes Its Business Private
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Broadband connectivity vendor Covad Communications Group is getting out of the stock market rat race and joining the ranks of the privately held.
In an all-cash deal valued at $304 million, private equity firm Platinum Equity will acquire Covad's outstanding publicly traded common stock for $1.02 per share. The deal represents a 59 percent premium over Covad's closing price on Oct. 26.
Covad's board of directors unanimously approved the deal, though shareholder and regulatory approvals are still to come. The company said it expects the deal to formally close by June, 2008.
"Platinum's approach will bolster the successful execution of Covad's business strategy while providing the resources and support necessary for sustained growth," Covad President and CEO Charles Hoffman said in a statement. "We believe that the resulting increased market competitiveness, improved capital structure, and enhanced product and network capabilities best position our customers, partners, and employees for the future."
Covad is expected to provide an update on its current financial situation after market close today, when it hosts its third-quarter earnings call.
Covad rose to prominence in the late 90's as a high-growth provider of broadband access. The company nearly flamed out in the Internet bubble bust period of 2000-2001 and reported a year 2000 fiscal loss of $1.5 billion. The massive hemorrhaging pushed Covad into bankruptcy protection in August, 2001, although the company restructured its affairs and emerged from Chapter 11 in December of that year.
In transitioning to a private company, Covad grows a growing number of technology vendors that are choosing to leave the public equity markets. In June, telco vendor Avaya announced in its own private affair for $8.2 billion.
Last month, networking vendor 3Comm announced it was going private in its own a $2.2 billion dollar deal.