Cypress Communications bought by U.S. RealTel

U.S. RealTel, an owner and leaser of communications rights, has come to an agreement to purchase Atlanta-based building local exchange carrier Cypress Communications.

The all-cash deal gives Cypress stockholders $3.50 per share, valuing the company at $17.15 million. Cypress closed trading yesterday at $1.92. The transaction, which requires that 90% of Cypress shares be tendered, is expected to close by the end of February.

Upon closing, Cypress CEO W. Frank Blount will retire, handing the reins to Charles McNamee. Gregory McGraw will become president and chief operating officer. The company will continue to operate as a communications service provider.

The sale is the latest news in a rough period for the BLEC space, which saw several bankruptcies and buyouts during 2001. Despite the trouble, the sector is a viable one if practiced more conservatively, said Nick Maynard, an analyst for The Yankee Group.

“Servicing the multitenant unit is definitely a viable business model. You just can’t do it the way a number of BLECS were doing it. They were too reliant on the RBOCs, they had outrageous growth projections … They spent way too much money getting access and lighting buildings. If you strip out these, office buildings are a viable market.”

Cypress currently has the right to provide communications services to more than 1300 buildings in Atlanta, Boston, Chicago, Dallas, Houston, Seattle and Los Angeles.