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EX-99.2 - ADDITIONAL EXHIBITS - Fusion Connect, Inc. | fsnn_presentation.htm |
EX-10.11 - MATERIAL CONTRACTS - Fusion Connect, Inc. | fsnn_ex1011.htm |
8-K - CURRENT REPORT - Fusion Connect, Inc. | fsnn_8k.htm |
Exhibit 99.1
FUSION ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE
BIRCH COMMUNICATIONS’ CLOUD AND BUSINESS SERVICES
BUSINESS
Transaction expected to create one of the largest North American
cloud services providers, with total pro forma annual revenue of
approximately $575 million
Combination expected to significantly enhance Fusion’s
innovative strategy as the single source for the cloud
●
Fusion to acquire
Birch’s Cloud and Business Services business, including its
customers, operations and infrastructure
●
Combined company is
expected to have total pro forma annual revenue of approximately
$575 million and more than $150 million in pro forma
annual adjusted EBITDA, including anticipated cost
synergies
●
Transaction is
expected to be significantly accretive to Fusion’s adjusted
EBITDA immediately upon closing, generating positive free cash flow
while dramatically reducing the company’s overall leverage
ratio, with net debt expected to be less than 4.0x pro forma
adjusted EBITDA
●
Birch shareholders
will exchange their equity position in Birch’s Cloud and
Business Services business, valued at approximately
$280 million, for common equity of the combined
company
●
All-stock
transaction in which Birch shareholders will receive approximately
73 million common shares of Fusion valued at $3.85 per share,
a premium of more than 200% versus the prior trading day’s
closing price, representing approximately 5x the pro forma adjusted
EBITDA of Birch’s Cloud and Business Services business
including anticipated synergies
●
Combined company
will serve more than 150,000 business customers throughout the
United States and Canada, and will have strong distribution through
direct sales, inside sales and more than 800 distribution
partners
●
Significant
opportunities for growth through cross-selling and upselling new
services into the combined customer base
NEW
YORK, NY -- August 28, 2017 -- Fusion (NASDAQ: FSNN), a leading
cloud services provider, announced today that it has entered into a
definitive agreement to acquire the Cloud and Business Services
customers, operations and infrastructure of privately-held Birch
Communications, which represents the majority of Birch’s
current revenues. The transaction is expected to close by the end
of 2017, subject to customary approvals and closing
conditions.
The
combination is expected to create one of the largest cloud services
providers in North America, with more than 150,000 business
customers and a 100% Internet Protocol-based network, including 30
data centers, 31,000 fiber route-miles of network, and metro fiber
assets in 11 major markets. The combined customer base is expected
to demonstrate strong fundamentals, with monthly recurring revenue
comprising approximately 87% of total revenue. In addition, the
combined company will have significant opportunities for growth by
cross-selling and upselling to existing customers with a
comprehensive suite of cloud and business services.
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The
acquisition will not include Birch’s legacy consumer and
single-line business customers, which have lower profitability and
average revenue per customer (ARPU) as well as higher churn
rates.
The
scale that this acquisition will bring to Fusion further
accelerates the company’s single-source cloud strategy. By
delivering its fully integrated cloud solutions over a single
platform, Fusion is able to solve the increasingly complex
challenges of migrating to the cloud. Fusion offers customers a
more efficient integration of cloud services and provides greater
control over the end-to-end user experience, thereby avoiding the
“finger pointing” often encountered when using multiple
service providers.
“This
acquisition is a major milestone in Fusion’s targeted and
disruptive strategy of becoming the leading single-source cloud
services provider to business and enterprise customers,” said
Matthew Rosen, Fusion’s Chief Executive Officer.
“Customers increasingly demand an end-to-end experience that
is reliable as well as efficient and innovative. Fusion is well
positioned to provide these services having been first-to-market to
pursue this strategy, and can now do so with increased scale and
resources.”
Mr.
Rosen continued, “This combination will immediately move
Fusion into the top tier of cloud services providers and
establishes a robust platform from which to pursue aggressive value
enhancing initiatives through both organic growth and strategic
acquisitions. By leveraging the significantly larger scale of
Fusion following the acquisition, the company will gain new
efficiencies and greater cash flows, which we believe will drive
shareholder value. We also expect that the new Fusion will gain
broader awareness among investors and analysts, along with expanded
access to the capital markets, which will further support our
compelling growth strategy.”
Vincent
Oddo, Chief Executive Officer of Birch Equity Partners, said,
“Matthew Rosen and his team have a unique and compelling
strategy for addressing the challenges that so many businesses face
when migrating to the cloud. Time and again, Fusion has
demonstrated its ability to deliver innovative and integrated
customer solutions, firmly establishing the company as the ideal
partner for Birch. We are confident that the combination of our two
companies will create significant value for our customers and all
stakeholders.”
Mr.
Oddo continued, “Our common vision for the future, commitment
to service excellence and culture of innovation provide a great
foundation for the integration of our teams and our ability to
attract customers with compelling cloud-based solutions. We are
excited to participate in Fusion’s ongoing success as
shareholders in the combined company.”
Additional Transaction Details
●
Under the terms of
the merger agreement, which has been approved by the boards of
directors of both companies, Birch shareholders will receive, for
all issued and outstanding shares of Birch common stock, the right
to receive, in the aggregate, shares of Fusion common stock equal
to three times the total number of issued and outstanding shares of
Fusion common stock immediately prior to the merger (assuming
conversion of all Fusion preferred stock into common stock and
in-the-money warrants, but excluding current outstanding options),
resulting in 25% pro forma ownership by Fusion shareholders and 75%
pro forma ownership by Birch shareholders
●
It is currently
estimated that approximately 73 million common shares of
Fusion will be issued in connection with this transaction, valued
at $3.85 per share
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●
Fusion will assume
Birch’s existing debt of approximately $458 million,
which is expected to be refinanced along with Fusion’s
existing debt
●
Matthew Rosen,
Chief Executive Officer of Fusion, will serve as CEO of the
combined company and will assume the role of Chairman of the Board
upon the close of the transaction
●
Fusion and Birch
shareholders will each appoint four directors to the combined
company’s Board, with a ninth director to be nominated by
Birch shareholders with Fusion’s prior approval
●
The transaction
contemplates over $20 million of cost synergies which are
expected to be achieved within 12 months of closing
●
The combined
company expects that it will continue to be listed on the Nasdaq
Capital Market and trade under the Fusion name and symbol
(FSNN)
●
All members of
Fusion’s Board of Directors have signed a support agreement
to vote their aggregate 10.5% interest in favor of the
transaction
The
transaction is subject to shareholder approvals and the
satisfaction of certain closing conditions including the receipt of
required regulatory and antitrust approvals and financing for the
transaction, as well as other customary closing
conditions.
Fusion
is subject to customary restrictions on its ability to solicit
alternative acquisition proposals from third parties and to provide
information to, and participate in discussions and engage in
negotiations with, third parties regarding alternative acquisition
proposals. However, prior to the receipt of the necessary
stockholder approval, such solicitation restrictions are subject to
a customary “fiduciary out” provision that allows
Fusion, under certain specified circumstances, to provide
information to, and participate in discussions and engage in
negotiations with, third parties with respect to alternative
acquisition proposals if its Board of Directors determines in good
faith (after consultation with its financial advisor and outside
legal counsel) that such alternative acquisition proposal either
constitutes a superior proposal or is reasonably likely to result
in a superior proposal and the failure to explore the alternative
acquisition proposal would be inconsistent with the
directors’ fiduciary duties pursuant to applicable
law.
Advisors
Greenberg
Traurig LLP is serving as M&A legal advisor and Kelley Drye
& Warren LLP is serving as special regulatory counsel to
Fusion. FTI Consulting is serving as financial advisor to Fusion
and has rendered a fairness opinion to Fusion’s Board of
Directors and its shareholders. Moelis & Co. is serving as
financial advisor to Birch. Jones Day is serving as M&A legal
advisor and Cahill Gordon & Reindell LLP is serving as special
regulatory counsel to Birch.
Investor Call and Presentation Information
An
investor presentation and pre-recorded comments from Fusion’s
management regarding the transaction will be made available on
August 28, 2017 at approximately 8:00 a.m. Eastern time. To
access the pre-recorded comments and presentation, please use the
following information:
By Phone:
Participant
Toll-Free Dial-In Number: (833) 652-5913
Participant
International Dial-In Number: (270)
823-1182
Confirmation
code: 77161636
Via Webcast:
http://edge.media-server.com/m/p/qctk7z5i
Or
visit Fusion’s Investor Relations website
at ir.fusionconnect.com
under “Events”
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In
addition, the investor presentation will be filed with the
Securities and Exchange Commission (the “SEC”) on or
before September 1, 2017, which can be viewed on the SEC’s
website at www.sec.gov.
Forward Looking Statements
Statements
in this press release that are not purely historical facts,
including statements regarding Fusion’s beliefs,
expectations, intentions or strategies for the future, may be
“forward-looking statements” within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934,
both as amended by the under the Private Securities Litigation
Reform Act of 1996. Such statements consist of any statement other
than a recitation of historical fact and may sometimes be
identified by the use of forward-looking terminology such as
“may”, “might,” “will,”
“should,” “could,” “predict,”
“project,” “future,”
“potential,” “seek to,” “plan,”
“assume,” “believe,” “target,”
“forecast,” “goal,”
“objective,” “expect”,
“anticipate”, “intend”,
“estimate” or “continue” or the negative
thereof or other variations thereof or comparable terminology. The
reader is cautioned that all forward-looking statements are
speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ from those referred
to in such forward-looking statements. These forward-looking
statements, include, but are not limited to, statements regarding
benefits of the proposed merger, integration plans and expected
synergies, anticipated future financial and operating performance
and results, including estimates for growth. Important risks
regarding the Company’s business include the Company’s
ability to raise additional capital to execute its comprehensive
business strategy; the integration of businesses and assets
following an acquisition; the Company’s ability to comply
with covenants included in its senior debt agreements; competitors
with broader product lines and greater resources; emergence into
new markets; natural disasters, acts of war, terrorism or other
events beyond the Company’s control; and other factors
identified by Fusion from time to time in its filings with the
Securities and Exchange Commission (“SEC”), which are
available through www.sec.gov. However, the
reader is cautioned that Fusion’s future performance could
also be affected by risks and uncertainties not enumerated above.
There are a number of risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements included in this communication. For example, the
expected timing and likelihood of completion of the pending merger,
including the timing, receipt and terms and conditions of any
required governmental and regulatory approvals of the pending
merger that could reduce anticipated benefits or cause the parties
to abandon the transaction, the ability to successfully integrate
the businesses, the occurrence of any event, change or other
circumstance that could give rise to the termination of the
agreement, the possibility that Fusion shareholders may not provide
the required shareholder approvals, the risk that the parties may
not be able to satisfy the conditions to the proposed transaction
in a timely manner or at all, risks related to disruption of
management time from ongoing business operations due to the
proposed transaction, the risk that any announcements relating to
the proposed transaction could have adverse effects on the market
price of Fusion’s common stock, the risk that the proposed
transaction and its announcement could have an adverse effect on
the ability of Fusion and Birch to retain customers and retain and
hire key personnel and maintain relationships with their suppliers
and customers and on their operating results and businesses
generally, problems may raise in integrating the businesses of the
companies which may result in the combined company operating less
effectively and efficiently than anticipated, the combined company
may not be able to achieve cost-cutting synergies or it may take
longer than anticipated to achieve those synergies, there is no
guarantee as to the trading price of the stock of the combined
company and other factors. All such factors are difficult to
predict and are beyond Fusion’s control. The Company
disclaims and does not undertake any obligation to update or revise
any forward-looking statement in this report, except as required by
applicable law or regulation.
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Additional Information and Where to Find It
This
communication relates to the proposed merger involving Fusion
Telecommunications International, Inc. ("Fusion"), Fusion BCHI
Acquisition LLC and Birch Communications Holdings, Inc. ("Birch").
In connection with the proposed merger, Fusion intends to file
relevant materials with the SEC, including Fusion's proxy statement
on Schedule 14A (the "Proxy Statement"). This communication does
not constitute an offer to sell or the solicitation of an offer to
buy any securities or a solicitation of any vote or approval, and
is not a substitute for the Proxy Statement or any other document
that Fusion may file with the SEC or send to its stockholders in
connection with the proposed merger. STOCKHOLDERS OF FUSION ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING
THE PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain the documents free of charge at the
SEC's web site, www.sec.gov and Fusion
stockholders will receive information at an appropriate time on how
to obtain transaction-related documents for free from
Fusion.
Participants in the Solicitation
This
communication is not a solicitation of a proxy from any security
holder of Fusion. However, Fusion and Birch and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from the stockholders of Fusion in
connection with the proposed merger. Information about the persons
who are, under the rules of the SEC, participants in the
solicitation of the stockholders of Fusion in connection with the
proposed transactions, including a description of their direct or
indirect interest, by security holdings or otherwise, will be set
forth in the proxy statement when it is filed by Fusion with the
SEC. Information about the officers and directors of Fusion may be
found in its proxy statement for Fusion’s 2016 Annual Meeting
of stockholders, which was filed with the SEC on September 2, 2016,
and in Fusion's Annual Report on Form 10-K for the fiscal year
ended December 31, 2017, which was originally filed with the SEC on
March 21, 2017 and Amendment on April 11, 2017 and April 28,
2017.
About Fusion
Fusion,
a leading provider of integrated cloud solutions to small, medium
and large businesses, is the industry's single source for the
cloud. Fusion's advanced, proprietary cloud service platform
enables the integration of leading edge solutions in the cloud,
including cloud communications, contact center, cloud connectivity,
and cloud computing. Fusion's innovative, yet proven cloud
solutions lower our customers' cost of ownership, and deliver new
levels of security, flexibility, scalability, and speed of
deployment. For more information, please visit www.fusionconnect.com.
About Birch
Birch
Communications is a leading North American Cloud and Business
Solutions Provider. For more than 20 years, Birch has been
recognized as a provider that delivers cost-effective solutions for
small and mid-sized businesses as well as an exceptional customer
experience. Birch’s industry-leading IP-network and product
portfolio are available across North America, and include: cloud
communications, cloud connectivity and cloud computing. For more
information, visit www.birch.com.
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Investor Contacts:
Brian
Coyne
212-201-2404
bcoyne@fusionconnect.com
Chris
Tyson
MZ
North America
(949)
491-8235
FSNN@mzgroup.us
www.mzgroup.us
Media Contacts:
For Fusion
Daniel
Yunger / Daniel Del Re
KEKST
212.521.4800
For Birch
Michelle
Ansley
770.874.4939
michelle.ansley@birch.com
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