Sterling, Va.-based information tech firm Neustar will be acquired for $2.9 billion by California private equity group Golden Gate Capital. That's $33.50 per share in cash for shareholders, a 45 percent premium on the company's stock price, before it jumped 20 percent on the news of the acquisition, that is.
That Neustar would be looking to get acquired isn't especially surprising. After losing the lucrative, $450 million a year federal phone number switching contract last year to Ericsson parent company Telcordiait, Neustar started to pivot into data analytics and media targeting work. The company spent $87 million to buy Bombora Technologies, $450 million to acquire marketing analytics firm MarketShare Partners and sold assets like its electronic surveillance technology.
Dips in its stock price and other difficulties after 18 years with the number switching contract as the bulk of its income took a toll. Neustar had clearly been looking at all kinds of options, including a plan to split the company into two publicly traded units, but the acquisition will preempt that.
There's another wrinkle to the story, however. The number switching contract, which controls thesystem that lets people switch phone companies while keeping their original phone numbers, is yet to be taken over by Telcordia. Delays in the process mean that Neustar still runs the system, and could keep doing so for another two or three years, a very nice chunk of change in the short term for Golden Gate, even if that goes away eventually.
Adding to that uncertainty is Neustar's own lawsuit against the FCC over the process that saw its contract pulled. Telcordia's foreign headquarters mean it can't be impartial as the number switching contract demands, according to the suit, thus making it ineligible. If that actually wins Neustar the contract back, it will be great news for Golden Gate, not only because of the revenue itself, but because it will be a chance to sell it again at a huge profit or even take the company public yet again, with a probably quite high IPO in the wake of the news.
