Monday March 27, 9:04 pm Eastern Time
Company Press Release
SOURCE: Convergent Communications
Texas Pacific Group to Lead $175 Million Investment In Convergent Communications
Commences Search for New CEO, Announces 1999 Results
ENGLEWOOD, Colo., March 27 /PRNewswire/ -- Convergent Communications(TM) (Nasdaq: CONV - news) announced today that the investment firm Texas Pacific Group (``TPG') has committed to lead a $175 million investment in the company.
TPG will invest $150 million, with affiliates of Sandler Capital Management investing the remainder.
The company also stated it has commenced a search for a new CEO, who will be replacing current founding Chairman and CEO John R. Evans. Korn/Ferry International, a leading international executive search firm, has been engaged to conduct the CEO search.
``We are extremely pleased that Texas Pacific has made this commitment to Convergent Communications. TPG is at the forefront of telecom and technology investing and brings a wealth of experience and resources to the company. They have a thorough understanding of our business and will be excellent partners to foster the growth and development of our company,' said Evans.
Under the terms of the commitment, the investors will subscribe to $175 million of newly issued 8 percent convertible preferred stock convertible into common stock at a conversion price of $13 per share, an 18 percent premium to the 30-day average closing price through March 27, 2000, of Convergent Communications' common stock. The preferred stock will vote together with the company's common stock on an as-if-converted basis. The investors will also receive 700,000 warrants exercisable at $20 per share and 1.17 million warrants exercisable at $25 per share.
Upon closing, TPG will designate two members to Convergent Communications' Board of Directors.
``Convergent Communications has assembled a significant asset base and a comprehensive service model in the telecommunications business for small- and medium- sized enterprises. With new capital and leadership, we believe we are investing in an excellent opportunity with Convergent Communications,' said Jeff Shaw, senior partner at TPG.
The transaction is expected to close within 30 days, subject to execution of the definitive agreement, various closing conditions and certain regulatory and legal approvals. Warburg Dillon Read, LLC, advised Convergent Communications and acted as the placement agent for the preferred stock and the warrants.
Year End Earnings
Convergent Communications also announced today its year-end 1999 results, indicating that the company generated fourth quarter revenues of $48 million, a 93 percent increase over the same period last year, bringing full-year revenues to $160 million, a 160 percent increase over 1998 year-end results. The company also reported an EBITDA loss of $28 million for the quarter resulting primarily from increased SG&A expenses related to continuing efforts to ramp-up its eBusiness Solutions, Enterprise Broadband and Enterprise Managed Services business segments. The previously announced earnings conference call scheduled for March 29th has been cancelled.
About Texas Pacific Group
Texas Pacific Group, founded in 1993, is an international private investment partnership with capital in excess of $7 billion, and with offices in Fort Worth, TX, San Francisco, CA, Washington, D.C., and London. An early private equity investor in technology and telecommunications, TPG's telecommunications investments include: FirstWorld Communications, Inc., a growing provider of Internet and data center solutions for small-to-medium sized businesses; Star One, a German provider of Point-to-Multipoint wireless broadband telecommunications; Advanced TelCom Group, a next generation Integrated Communications Provider targeting third- and fourth-tier cities; Paradyne Networks, a broadband access device manufacturer; GlobeSpan Inc., the leading DSL chip set developer; Zhone Technologies, a producer of data networking equipment; Landis & Gyr Communications, the world's largest public telephony equipment and systems provider; and GT Com, a telecom service provider. Other technology investments include Gemplus S.A., Interlink Group, DoveBid, Inc., ON Semiconductor, and Zilog, Inc. The partnership has made significant investments in a broad range of other industries, including consumer products, healthcare, airlines, food and beverage, and oil and gas.
About Sandler Capital
Sandler Capital Management is a leading investment management firm specializing in media, entertainment, telecommunications, information services, publishing, Internet and online services. Sandler has previously invested in the company and Michael J. Marocco, managing director, is on the board of directors.
About Convergent Communications
Convergent Communications, Inc. (Nasdaq: CONV - news), is the holding company of Convergent Communications Services, Inc., and Convergent Capital Corporation. Convergent Communications Services is a provider of broadband IP-based business communications Solutions including a full range of e-commerce services. With operations in 35 markets, the company's services include the design, implementation, support and monitoring of data and voice networks and Internet services. For more information on Convergent Communications, visit the company's Web site at converg.com.
The statements made by Convergent Communications(TM) in this press release may be forward-looking in nature. Information in this press release is qualified by the more detailed information contained in the company's 1998 annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 1999 and its quarterly reports on form 10-QA filed for the first and second quarters of 1999 and its quarterly report on Form 10-Q for the third quarter of 1999. Forward-looking statements in this news release are expectations, not historical facts. Such statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially. Such risks and uncertainties include, but are not limited to, the degree to which the company is leveraged and the restrictions imposed on the company under its existing debt instruments that may adversely affect the company's ability to finance its future operations, to compete effectively against better-capitalized competitors and to withstand downturns in its business or the economy generally; and other factors discussed in the company's filings with the Securities and Exchange Commission.
SOURCE: Convergent Communications |
