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Zoom’s $ 14.7 billion deal with Five 9 undergoes US scrutiny of foreign relations

Zoom Video Communications Inc Update

The U.S. Department of Justice raised national security concerns in connection with Zoom Video Communications’ plans to acquire cloud software company Five9 and called for a secondary review of the $ 14.7 billion transaction agreed by web conferencing providers.

so letter To the Federal Communications Commission, the ministry’s National Security Department evaluates “foreign participation” in the U.S. telecommunications sector. It poses a risk to the interests of the United States. ”

The FCC, the major US telecommunications regulator, is considering the deal, but a committee review will further strengthen its regulatory involvement.

Zoom’s reliance on a large base of Chinese developers has long questioned its potential impact on China’s business. The San Jose, Calif.-based company admitted last year that it accidentally routed some calls through China, but claimed that customer data would not flow through servers in Asian countries. Did.

It was also discovered that one of China’s executives worked with Chinese authorities to thwart a video conference commemorating the 1989 Tiananmen Square protest, despite being held in the United States. In both cases, it is the focus of the Justice Department’s investigation.

“The U.S. Department of Justice believes that such risks may arise from foreign participation (including foreign relationships and ownership) associated with the application, and how the Commission’s review evaluates it. And it is necessary to make appropriate recommendations. [the FCC] The Justice Ministry said in a letter dated August 27.

The Justice Ministry’s letter states that antitrust law, foreign investment, Securities regulation As the relationship between Washington and Beijing cools, it will take a stricter stance on China’s investment in US companies.

Zoom states: “The acquisition of Five9 requires the approval of certain telecommunications regulators. We have submitted to various applicable regulators and these approval processes are proceeding as expected. First half of 2022 We continue to expect the regulatory approvals required to complete the transaction. ”

Five9, based in San Ramon, California, declined to comment.

Of zoom handle The acquisition of Five9, announced in July, will be the company’s first major acquisition. All-stock trading valued Five9 shares at $ 200.28 and investors were set to receive 0.5533 shares of Zoom Class A common stock.

However, concerns over the fall in Zoom’s share price and the outlook after the blockade have cast a shadow over the deal. The company’s share price has fallen 23% since the deal was announced, and Five9’s share price is now $ 154 per share, significantly lower than the current $ 170.

Institutional Shareholder Services, an influential agency, has five 9 shareholders voted against the deal because of concerns about the company’s growth as it becomes easier to deal with pandemic social distances. Recommended to throw.

“By trading all stocks [Five9] Shareholders are investing in more volatile stocks, whose growth prospects are waning as society approaches the post-pandemic environment, “the ISS wrote in a report released last week.

The deputy adviser also warned of the political risks associated with Zoom’s “substantial business in China.”

The news of the Justice Department letter was first reported by The Wall Street Journal.

Zoom’s $ 14.7 billion deal with Five 9 undergoes US scrutiny of foreign relations

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