UPDATED 20:48 EDT / SEPTEMBER 30 2021

CLOUD

Five9 shareholders reject Zoom takeover offer after authorities raised security concerns

Zoom Video Communications Inc.’s attempt to acquire cloud contact center provider Five9 Inc. is no longer.

Five9 shareholders rejected the takeover offer today after U.S. regulators raised national security concerns over the deal. Zoom had announced in July that it entered into an agreement to acquire the company for a considerable $14.7 billion.

Althoughall takeover offers are subject to shareholder approval, it’s rare that one is rejected. That the offer was rejected even at a strong premium to Five9’s market cap is arguably quite remarkable, though an indication of the poor state of current U.S.-China relations.

Officially, Five9 and Zoom are saying that the acquisition deal was terminated by mutual agreement. “The agreement did not receive the requisite number of votes from Five9 shareholders to approve the merger with Zoom,” Five9 said in a statement. “Five9 will continue to operate as a standalone publicly-traded company.”

The two companies will continue a partnership that was in place before the takeover announcement. That partnership includes support for integrations between their respective unified communications-as-a-service and contact center-as-a-service solutions, as well as joint go-to-market efforts.

Founded in 2001, Five9 offers cloud software for the enterprise contact center market with a software-as-a-service platform that has seen rapid growth over the last year thanks to the COVID-19 pandemic. Designed to help organizations move operations from legacy on-premises data centers to the cloud, the company pitches its offering as providing business reliable, secure, compliant and scalable cloud contact center software that improves customer experiences.

Earlier this month, the wheels started falling off the deal when the U.S. Department of Justice announced that its national security division had raised concerns. The division was reported to have asked the Federal Communications Commission to allow a further investigation by the DOJ’s committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector.

Although Zoom became to videoconferencing during the COVID-19 pandemic what Google LLC is to search It has its origins in China. The Justice Department specifically cited “the foreign relationships and ownership” of Zoom as a potential national security risk.

All that said, it was expected that the deal would likely gain approval anyway. That Five9 shareholders have rejected the offer before the Justice Department could thoroughly review the deal makes any investigation now a moot point.

Shares in Five9 fell 1.2% in regular trading, to $159.74 a share.

Image: Zoom

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