Covad Shareholders Vote to Sell

Shareholders of Covad have voted to approve the $304 million bid by Platinum Equity to buy the struggling broadband carrier and take it private. The majority vote from Covad’s shareholders comes little more than a week after the proposed bid gained approval of antitrust regulators, following the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act that expired Feb. 19th. The deal is expected to finalize in 30-60 days provided filings with the Federal Communications Commission and public service commissions receive required approval. The company said it has finished all necessary filings for the needed approvals. A potential snag in the plans to complete the deal may come from several unsatisfied shareholders filing class-action lawsuits because the offered price didn’t meet their expectations. At the time of the announcement in October 2007, the offered price of $1.02 per share was at a 59% premium to current share prices but well below the $2.59 Covad shares were trading at in the second quarter of 2006. Over the past five years Covad’s shares have suffered as a result of the company’s poor financial performance. Broadband subscribers have steadily declined over the past several years and the company reported a loss of $43 million on sales of $484 million for all of 2007. The second quarter of 2006 was one the few times the ailing company has showed profit over the past half decade. Platinum Equities plans to take Covad private and has a history of turning troubled companies around. They’re no strangers to the telecom industry either. Over the past decade the company has aquired many industry related companies and divisions including Matrix Business Technologies, a small business division of Global Crossing, industry-giant U.S. Robotics and WorldCom’s DCA Services. It stands to be seen what Platinum can do to turn around Covad.