Warburg Pincus will invest $245 million (€182 million) in Integra Telecom, a Portland, Oregon-based telecom company that provides local exchange service. Integra is currently the process of completing a separate, $710 million acquisition of Eschelon Telecom, which will make it the largest competitive local exchange carrier in the western United States.
New York-based Warburg Pincus will make the investment by purchasing equity from unnamed existing Integra shareholders; Integra’s current primary equity investors include Banc of America Capital Investors, Boston Ventures and Nautic Equity Partners.
Dudley Slater, Integra’s chief executive, called Warburg Pincus’ investment a “tremendous vote of confidence”, and said in a statement that it validates Integra’s business model and recognises the company’s potential.
Morgan Stanley advised Warburg Pincus on the deal, and Deutsche Bank Securities advised Integra. The transaction is expected to close in the fall.
Warburg Pincus has invested been a major investor in the telecom and communications sectors, and last September it hired former AT&T head David Dorman as a senior advisor for its technology, media and telecommunications group. In June, it sold its 23 percent stake Avaya, a telecom company, to TPG and Silver Lake Partners for $8.2 billion. Last year, it acquired Telmar Network Communications, a logistics and supply chain broker to the communications industry, for an undisclosed amount. At the time of that investment, the firm said it had made more than 120 investments worth $5 billion in communications technology companies.
Private equity buyouts of telecommunications companies have recently drawn Congressional scrutiny. In July, several Congressmen asked the Federal Communications Commission to examine buyouts in the media and telecom sectors to determine if private equity ownership conflicts with US media ownership rules.