Analyst: Zoom Video Buyout Of Five9 Accelerates xCaaS Expansion

Five9 Inc FIVN shares traded higher by 4.5% on Monday morning after Zoom Video Communications Inc ZM announced a $14.7 billion takeover of Five9.

What Happened? On Sunday, Zoom announced cloud software company Five9 will be its first-ever billion-dollar acquisition. As part of the deal, Five9 shareholders will receive 0.5533 shares of Zoom for each Five9 share they hold.

The deal was priced at about a 13% premium to Friday’s closing price, but Zoom shares dropped by 3.7% in a weak trading session on Monday morning.

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Why It’s Important: Bank of America analyst Daniel Bartus said Monday that he had anticipated Zoom would look to beef up its Contact Center business by either building its own internal assets or looking for an acquisition target.

In acquiring Five9, Bartus said Zoom is looking to make an immediate entry into the space rather than taking a gamble on gaining traction and market share over time.

“The Five9 acquisition should accelerate Zoom’s efforts to expand beyond its leadership position in core video meetings to all things communications as a service (or xCaaS),” Bartus said Monday.

Bartus said the implied $200.28 per share buyout price at the time the deal was announced is a reasonable price for Five9 given it was roughly in line with his own $195 price target for the standalone stock.

Bank of America also has a Buy rating and a $480 price target for Zoom Video.

Looking ahead, Bartus said his recent checks with both Five9 and contact center as a service (CCaaS) partners, consultants, and resellers suggest the business is trending in the right direction and could even be set up for a post-pandemic acceleration in the months ahead.

He estimates the combination of Zoom and Five9 will potentially create the strongest competitor in the entire $88 billion xCaaS market.

Benzinga’s Take: The all-stock nature of the deal means Five9 investors’ collective fates are now tied to the value of Zoom’s stock, which was under pressure on Monday morning. If Monday’s sell-off continues in the coming days, Five9 shares could even trade back below their pre-buyout levels at some point.