Platinum in $304m telecom deal

Tom Gores’ Platinum Equity will add to its already substantial telecom portfolio with the acquisition of Covad Communications.

Platinum Equity has agreed to acquire Covad Communications, a US voice and data communications services provider, for $304 million (€210 million) in cash. Platinum’s bid of $1.02 per share in cash represents a 59 percent premium over the stock’s closing price last Friday.

“There is an opportunity for growth as the demand for high-bandwidth services continues to evolve, and we’re eager to help Covad drive that growth,” Platinum partner Johnny Lopez said in a statement.

Covad was founded in 1996 by three Intel executives, but quickly floundered. In 2000 the company reported a $1.5 billion loss, and in 2001 it filed for bankrupcty. Covad emerged from bankrupcty by the end of that year.

Platinum, which is currently raising more than $1.5 billion for its second fund, has long been active in the telecom industry. The firm’s most recent deal in the sector was the $24 million acquisition of the wireless deployment business of US defence systems company WFI in July. Platinum also has also invested in Americatel Corp and Matrix Business Technologies, among others.

This year has seen a number of large telecom deals, including TPG's and Silver Lake's $8.2 billion acquisition of Lucent spin-out Avaya, Goldman Sachs' and TPG's $27.5 billion buyout of US wireless provider Alltel, and Madison Dearborn Partners', Providence Equity Partners's and the Ontario Teachers' Pension Plan's C$49 billion ($51 billion, €36 billion) take-private of Bell Canada Enterprises.