TPG Capital is embarking on its second big telecom venture in two weeks, joining with another private equity firm, Silver Lake, in an $8.2 billion bid for Avaya Inc.
Avaya said Monday night that it has agreed to the firms’ offer of $17.50 in cash per share, two weeks after wireless phone company Alltel Corp. announced its $24.7 billion buyout by TPG Capital and Goldman Sachs Group Inc.’s GS Capital Partners.
The $17.50 per share price for Avaya is a 28 percent premium over the closing share price on May 25, the last trading day before reports that Avaya was negotiating to sell all or part of the company.
Avaya shares climbed 64 cents, or 4 percent, to $16.72 Monday after rising steadily this year in anticipation of a buyout. The stock has traded from $8.85 to $16.25 in the last 52 weeks.
“In addition to delivering compelling value for our shareholders, the partnership with Silver Lake and TPG also creates clear value for Avaya employees and customers,” Avaya President and Chief Executive Louis J. D’Ambrosio said in a statement. “The investment in our people and technology and the operating structure will enable us to extend our technology and services leadership and continue to deliver the ’gold standard’ of communication solutions in the industry.”
Silver Lake co-founder and Managing Director David Roux said the firm’s interests are aligned with those of Avaya’s customers and employees.
“We have full confidence in Avaya’s excellent management to build on the company’s remarkable technology and history,” he said.
Basking Ridge-based Avaya said it expects the transaction to be completed this fall, subject to shareholder and regulatory approval. The purchase agreement gives Avaya 50 days to solicit other proposals.
With $5.12 billion in sales last year, Avaya makes software, hardware and multimedia telecommunications systems helping businesses and government agencies manage customer service and other functions requiring communications networks.
A former division of Lucent Technologies and its predecessor firm AT&T Inc., Avaya also has patents and equipment for transforming traditional phone and data systems into integrated Internet Protocol-based networks.
Like other telecommunication equipment makers, Avaya has been trying to boost the continuing revenues that come from maintaining communication systems, rather than relying heavily on one-time sales. But the company struggled with rising costs, falling profits and a depressed share price, culminating with the replacement of President and CEO Donald K. Peterson last July.