Bandwidth has signed a definitive agreement to snap up Voxbone for an enterprise value of €446 million ($527 million) in a move to take a larger share in the transformation of enterprise cloud communications. Shares are advancing 3.9%.
Bandwidth (BAND) said that the deal value translates into a multiple of approximately 6 times anticipated Voxbone 2020 revenue. The consideration to Voxbone shareholders will consist of $400 million in cash with the remainder being paid in Bandwidth Class A common stock (approximately €108 million). The transaction is expected to close on October 31, 2020 after which Voxbone will operate under the Bandwidth brand. Voxbone operates a European-based cloud communications platform and IP voice network.
Bandwidth said the acquisition comes as enterprises are prioritizing voice, video, and text communications in their digital transformations. At the center of this challenge is a critical need for a single global cloud communications platform and network, the company said.
“Bandwidth’s deep US presence and Voxbone’s world-wide platform across 60+ countries will serve enterprises in countries representing 93% of global GDP. Today’s announcement accelerates our international strategy by several years. Our current and future customers will benefit from using a unified software platform, network and team to serve people around the world,” said Bandwidth CEO David Morken. “Voxbone’s platform is trusted by approximately 900 enterprises, including brands like Uber, Zoom, 8×8 and Skype.”
Upon closure, the deal will be accretive to Bandwidth’s non-GAAP gross margin and non-GAAP net income, the company said. Voxbone’s 2020 revenue is expected to increase by more than 25% to more than $85 million year-over-year.
In addition, Bandwidth said that it forecasts to report third quarter revenue and non-GAAP EPS that are above the guidance ranges provided on July 30. The company is scheduled to release its financial results for the three months ended September 30 on October 29 after market close. (See BAND stock analysis on TipRanks)
Bandwidth shares have exploded 188% so far this year, and the stock has a Moderate Buy analyst consensus. That’s with 5 Buy ratings versus 1 Sell rating. The $165.83 average analyst price target indicates 10.4% downside potential to current levels.
Morgan Stanley analyst Meta Marshall last week downgraded the stock to Sell from Hold but raised the price target to $140 from $120, citing downside risk over the next 12-18 months.
Marshall believes that Bandwidth’s “growth and profitability expectations are likely to not show the upside investors have become accustomed to” amid increased competition pressure.