LEWISTON, Maine — Faced with a dire financial picture, Oxford Networks has agreed to be acquired by a Canadian private equity firm.
Novacap, a private equity firm based in Montreal, would pay a total of $50 million for Oxford Networks, comprised of the equity and debt financing, according to a proxy statement sent to Oxford Networks’ shareholders and acquired by the Bangor Daily News.
Oxford Networks is a 113-year-old telecommunications and IT services firm headquartered in Lewiston. It employs approximately 120.
The company has faced financial challenges in the past few years as it struggled to secure enough capital to continue the growth strategy begun in the early 2000s to evolve from a traditional telephone company to a diversified telecommunications technology provider.
Last August, the Bangor Daily News reported the company lost $2.8 million in 2012.
Craig Gunderson, Oxford Networks’ CEO, told the BDN in an interview Wednesday that he could not expand on anything included in the proxy statement because the company is in a “quiet period.”
However, he said that being acquired by Novacap would give the company the necessary resources to continue expanding its services for customers. Novacap, which has managed more than $1 billion since its inception in 1981, also has extensive experience in the telecommunications sector that would serve Oxford Networks well, Gunderson said.
“We view this as a positive for our customers, the communities we serve and the employees of Oxford,” Gunderson told the BDN.
The proxy statement outlines the conditions under which Novacap would acquire Oxford Networks and all its assets, including its fiber-optic network that extends from Bangor to Boston and a data center at Brunswick Landing the company acquired in 2012.
The company’s board approved the proposed deal at a meeting held Dec. 18, 2013, according to the proxy statement. Among its stated reasons for approval was the fact the company’s need for capital “had reached a critical point.”
“The company’s management was and remains concerned that, without an imminent equity infusion, the company’s ability to retain valuable customers and vendor relationships would be jeopardized,” the proxy statement reads.
Oxford Networks is not a publicly traded company, but it does have shareholders. Those shareholders still need to approve the deal. A shareholders meeting is scheduled for Jan. 23. At least a majority of the shareholders of common and preferred stock must vote to approve the deal, according to the proxy statement.
Under the agreement, and based on current projections, following the acquisition Oxford Networks’ preferred shareholders would receive $17.3 million, which would be divided into $10.9 million in cash payments, a $5 million promissory note and a $1.35 million escrow.
The holders of the company’s 892,209 shares of common stock, however, would receive nothing upon closure of the deal, but would have the chance to receive payments in the future if Novacap earns at least three times its initial cash investment in Oxford, currently estimated to be $18.5 million. That means that if Novacap later sold Oxford, it would have to receive at least $55.5 million for common shareholders to realize any financial gains.
The closing of the deal would be subject to approval by the Maine Public Utilities Commission — because two of Oxford Network’s subsidiaries, Oxford Telephone Co. and Oxford West Telephone Co., are still regulated utilities — and the U.S. Federal Communications Commission.
The deal could officially close as early as April 2014. Tony Perkins, an attorney representing Oxford Networks, said that date is only a projection and could change based on how long it takes to get the regulatory approvals.
Assuming the deal closes, Gunderson and other members of the executive team are expected to remain in their current positions, according to the proxy statement.
In a news release issued by Oxford after the BDN’s interview with Gunderson, the company revealed it would be using the capital to expand its data center in Brunswick.
“The market demand for ultra secure cloud computing and data storage products and services is growing every day and this expansion will uniquely position us to offer leading edge technology to our customers in Maine, New England and beyond,” Ron Shink, Oxford Networks’ chief technology officer, said in a statement.