US committee examines Zoom’s proposed $ 14.7 billion acquisition of Five9


Zoom founder Eric Yuan speaks at the Nasdaq opening bell in New York on April 18, 2019.

Hit by Betancur | Getty Images

A US government committee is reviewing Zoom’s agreement to acquire Five9 cloud contact center software company for $ 14.7 billion for national security reasons.

According to a letter dated Aug. 27 and posted on the Federal Communications Commission’s website, the FCC has been asked to refer the case to the Committee on Assessing Foreign Participations in the Telecommunications Services Sector of the United States. The committee is chaired by Attorney General Merrick Garland, chief of the US Department of Justice.

Zoom announced the deal with Five9 in July, marking the video chat company’s first billion-dollar acquisition. Zoom rose in value during the pandemic and is trying to use Five9’s technology to expand into adjacent markets.

Zoom is based in San Jose, California and Eric Yuan, a Chinese-born founder and CEO, is a US citizen. The company has a major research and development center in China, and last year House spokeswoman Nancy Pelosi, California, referred to Zoom as “a Chinese entity” during an interview with MSNBC.

“The USDOJ believes that such risk may be increased by foreign involvement (including foreign relationships and ownership) associated with the application, and a review by the committee is required in order to provide an appropriate recommendation on the assessment of this application by the Commission, ”wrote David Plotinsky from the Justice Department in the letter to the FCC.

Zoom Sill expects the acquisition to close in the first half of 2022, a company spokesman told CNBC in an email.

“We have submitted applications to the various relevant regulatory authorities and these approval processes are proceeding as expected,” said the representative. A Five9 spokesman declined to comment.

The Wall Street Journal reported the letter to the FCC earlier on Tuesday.

The committee that sent the letter was formalized in 2020 by an executive order from former President Donald Trump. The committee formerly known as Team Telecom advises the FCC on potential threats to telecommunications networks. It is separate from the United States Foreign Investment Committee (CFIUS), which prevented Chinese companies from buying US companies.

In its latest earnings report in August, Zoom acknowledged that the company may be exposed to risks related to Five9’s operations in Russia.

“We will have to manage Five9’s international operations, including technical staff and operations in Russia, which can introduce regulatory, economic, and political risks, as well as additional challenges, if or when relations between Russia and the United States deteriorate significantly either Russia or the United States will impose or implement new or expanded economic sanctions, supply chain restrictions or other restrictions on doing business, ”Zoom said in the report.

Zoom executives said they expect revenue to grow 31% in the current quarter, up from over 300% growth last year. Five9 posted 44% growth in the most recent quarter.

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