Warburg Pincus takes $245M stake in CLEC

Private equity firm Warburg Pincus has agreed to invest at least $245 million in Integra Telecom, a competitive local exchange carrier (CLEC) based in Portland, Ore., that has been acquiring other carriers in recent years.

Warburg is taking a minority stake in the eleven-year-old privately held company, buying outstanding shares from existing investors, Integra said in a release issued today.

Integra announced in March it would acquire another CLEC, Eschelon Telecom, for $710 million, using debt arranged by Deutsche Bank, Morgan Stanley and CIBC World Markets. The company expects that deal to close in the third quarter. Last year, it acquired another CLEC, Electric Lightwave.

Integra’s chief executive officer Dudley Slater today told The Oregonian, his home state newspaper, that more acquisitions may lie ahead. "I would say [Warburg Pincus is] very excited and open to that possibility," he said.

Integra offers voice and data services, including carrier Ethernet, to small and medium businesses in Arizona, California, Idaho, Minnesota, North Dakota, Oregon, Utah and Washington. Its chief competitor is Qwest Communications.

Warburg has done well in past telecom investments. Between 2001 and 2005, the firm made more than five times its original investment in Bharti Televentures. The Indian mobile carrier had fewer than 800,000 customers when Warburg took a 1% stake in the company for $300 million. That investment ultimately brought Warburg more than $1.6 billion in returns.