April 9, 2003 -- CityNet Telecommunications has purchased a controlling interest in network services provider Universal Access Global Holdings, the two companies said today.
CityNet, best known for its technology that runs fiber optic cabling through city sewers, will invest $16 million in Universal Access in exchange for a 55 percent stake in the company and control of the board of directors.
"This new investment will strengthen our balance sheet and provide additional capital to expand our overall marketing and sales efforts in key market segments," said Lance Boxer, CEO of Universal Access. "These include cable companies, foreign carriers and the government. This transaction also will allow us to benefit from the experience and resources of CityNet and its shareholders."
CityNet's investors include Telecom Partners, Crescendo Ventures, CIBC, The Carlyle Group, and Great Hill Partners.
Net proceeds to Universal Access after transaction costs will be $14.5 million. The Chicago-based provider, which was previously debt free, will also assume a $2 million in CityNet debt in connection with the equity investment.
"We have been looking for strategic investment opportunities in the telecom market that will help us diversify into new sectors," said Emilio Pardo, Chief Executive Officer of CityNet. "We were impressed with Universal Access' restructuring efforts over the past year and the new management team's success in creating a leaner operating structure and a stronger, more diversified customer base.
"When you couple this with CityNet's strategic relationships in the industry, marketing expertise and government relationships, this is a great long-term investment for us," Pardo added.
"Procurement and provisioning of off-net circuits continue to represent a large market opportunity that Universal Access' business model and strong value proposition readily address," said William J. Elsner, Chairman of CityNet and Managing Member of Telecom Partners. "We believe CityNet's additional capital will be integral to helping the company capitalize on this opportunity."
CityNet will have the right to appoint five directors to the board, while Universal Access will appoint four directors, including Boxer. The new team of experienced senior executives recruited by Universal Access will continue to lead the company. The deal is subject to a vote of Universal Access' shareholders and regulators, but is expected to close by July 2003, the companies said.
Universal Access specializes in telecommunications procurement services for carriers, service providers, cable companies, system integrators and government customers worldwide.
CityNet is a broadband infrastructure construction company that has pioneered deployment of last-mile fiber optic networks through in-city sewer systems.