Montreal-based Teleglobe International Holdings Ltd. announced earlier this week its intentions to acquire wholesale voice over Internet protocol (VoIP) provider Internet Telephony Exchange Carrier Corp. (ITXC) – a move that one analyst said is strategic in more ways than one.
Although Internet protocol (IP) “is the way of the future, and wholesale is a good niche for carriers,” Lawrence Surtees, director of telecom and Internet research at IDC Canada Ltd. in Toronto said that the NASDAQ stock exchange also played a role in Teleglobe’s decision to buy the company.
Both Teleglobe – provider of international voice, data, Internet and mobile roaming services – and Princeton, N.J. based ITXC have signed the definitive merger agreement which, according to Teleglobe, will accelerate its plans for next-generation services in its core offerings.
Over the past year, since the company’s restructuring – after being sold by BCE Inc. to Cerberus Capital Management LP and TenX Capital Partners LLC for US$155.3 million – Teleglobe has taken a new direction. The company is now focusing on being a carrier’s carrier in the international marketplace, Surtees explained.
“So this deal dovetails very nicely with that strategy and that’s why Teleglobe would be looking to do something and [this] gives it some customers and technology…[And] it can turn around and package to other carriers and that’s all it wants to do with its life right now,” he added.
Since its restructuring in September 2002, Surtees said Teleglobe is doing “quite nicely” and that what may be the bigger part of this deal is that it is mimicking what junior high-tech companies did in the 70s and 80s, which is to create what is called a reverse takeover. A reverse takeover is when a publicly traded company buys another publicly traded company, Surtees explained. In this case Teleglobe, which is the acquirer, wants to assume the better stock listing of the smaller company it has bought, ITXC, and change that company’s name to Teleglobe. Teleglobe will then assume the U.S. NASDAQ exchange listing of ITXC.
Surtees said that after its restructuring, Teleglobe probably wasn’t big enough to warrant a place on the New York stock exchange, but by purchasing ITXC, it has subsequently gained a spot on the NASDAQ.
He added this spot would be attractive to New York-based Cerberus Capital Management LP – the company that owns the majority of Teleglobe – because if the company ever decided to sell its stake in Teleglobe, “they would love to have a market for that stock in the United States, and the best way to go about that is a NASDAQ listing,” Surtees said.
No money will exchange hands in this acquisition, Teleglobe said, adding that this is purely a stock for stock transaction which will give ITXC common stock holders common shares of the Teleglobe group of companies. This will represent 28 per cent of the Teleglobe parent company. The majority shareholder will continue to be Cerberus.
Before becoming final, the transaction must meet certain requirements including: approval by ITXC’s shareholders; the meeting of certain financial tests by ITXC and Teleglobe; and the approval for listing of Teleglobe common shares on NASDAQ or another U.S. national securities exchange.