Telcordia sale confirmed

The wait and speculation is over for employees of Telcordia Technologies as CEO Matt Desch confirmed this morning the sale of the company to Warburg Pincus and Providence Equity Partners.

The $1.35 billion all-cash deal is expected to close within 60 days. Telcordia will remain intact, ending speculation that the company would be sold piecemeal. The management team, including Desch, also will remain with the company.

Telcordia joins other Warburg Pincus holding such as Avaya, BEA, LSSI, NeuStar, Proxim and SS8 Networks. Warburg Pincus has raised nine equity funds since 1980 worth $13.8 billion after starting the company in 1971 with a $41 million equity fund. Warburg Pincus has taken 65 companies public since 1990.

Providence Equity Partners has over $5 billion in equity commitment and investments in several operator companies including Allstream (formerly AT&T Canada), CellularOne, Eircom (Ireland’s national fixed line carrier), Western Wireless, and both Deutsch Telekom and NTT through the acquisitions of VoiceStream Wireless and Verio, respectively.

"SAIC selected Warburg Pincus and Providence Equity for a number of reasons, but I would like to think the most important was the depth of experience and success they have had in this space," Desch said. "They understood our vision better than anybody and they have the most potential to help us achieve our potential."

Desch will speak to employees this morning and hold a press conference later today. A new board of directors will likely be appointed, but those positions have not yet been decided.

The equity firms beat out nine other bidders. "I don’t think I am taking anything away from anyone else by saying I am pleased it turned out to be Warburg Pincus and Providence," Desch said. "It was clear throughout the process that they understood our space well."

In early October Desch said he expected the process might take months to complete, but in the end SAIC drove a tight process to ensure only the best-qualified suitors spent time in the process. "These things can drag on a lot longer and I appreciate the fact that it didn’t," Desch said.

He also said in October that he was hoping to find a less risk-averse owner and says now that the company has found two. "Warburg and Providence only deal in risk. They are betting on a business model, a management team and industry space in terms of opportunity and that’s all we could have hoped for," he said.

SAIC acquired Telcordia in 1997 and the company is celebrating its 20th anniversary since getting founded as a result of divestiture in 1984. "It’s almost a perfect time to celebrate our past but also start thinking about the next 20 years," Desch said.

And those 20 years should see some more change for the company. "It’s not that things won’t change within Telcordia. We have been changing so much over the last couple of years that this only allows us to continue changing even faster. It’s not a matter of what’s different, but what can continue to be different," Desch said.

Asked if that hinted at force reductions, as some analysts have said would be the result if the company was bought by a financial firm, Desch said Telcordia would continue to be the most cost-effective and efficient company it could to ensure long-term success and that nothing needs to be done as a result of the sale to change that.

"We believe we can continue to grow. In fact, we will need more people in the future in certain areas. They may be different people in different places as we move into new business areas in new parts of the world, but this doesn’t change our business plan," Desch said.

He also said that the company doesn’t face the job overlap that would result from being acquired by a strategic buyer.