Israel's Nice Systems to Acquire inContact of the U.S. in $940 Million Takeover

Acquisition will expand its offerings to cloud-based services, positioning the Israeli company to address a $15 billion market.

Nice Systems CEO Barak Eilam
Erik Snider

Israel’s Nice Systems said yesterday it was spending $940 million to buy the U.S. company inContact in a move to create a company that will offer the first cloud-computing-based technology for corporate customer-service centers.

The announced also signaled that Nice, one of Israel’s oldest and biggest high-tech companies, planned to remain independent and to expand its global presence.

“This isn’t a deal between two rivals, with one buying the other to consolidate the market, but one representing a major strategic move. We see Nice as an Israeli company that isn’t putting itself up for sale but wants to grow its footprint in international markets,” CEO Barak Eilam told TheMarker.

The two companies said that stockholders of the Salt Lake City-based inContact would receive $14 per share in cash, a 55% premium over the share’s closing price on Tuesday and a 49% premium to the 30-day volume-weighted average price. The news sent inContact shares soaring 53.5% to $13.83 in late trading on Nasdaq. Nice shares gained as well, rising 3.8% to $66.21 in late trading in New York.

The deal would be by far the biggest Nice has ever made, but Eilam said the company was generating enough cash to finance most of the acquisition, with bank loans providing $475 million of the remainder.

Nice, which is headquartered in Ra’anana, now operates in two markets, providing technology for corporate service centers and to detect fraud and money laundering.

Buying inContact, which develops cloud software for call centers, would enable Nice to expand sales significantly in the segment by offering services that small- and medium-sized companies can afford. Eilam said the enhanced customer base could bring Nice a market worth $15 billion annually.

“It’s true there have been alliances and a little integration [in the industry], but there hasn’t been a tie-up that gave the customer everything he wanted. We are joining two overlapping segments for operating customer-service centers and for offering cloud-based service in a way that eases the technology burden on companies and gives them very considerable business value-added,” Eilam said.

Since he took over as CEO two years ago, Eilam has focused Nice on its business technology and divested the homeland security business where the company got its start.

As part of the process, Nice sold its two cybersecurity units last year to Israeli defense company Elbit Systems and Liberty Ventures for a combined $258 million. In January it bought Nexidia, a U.S. company that provides customer analytics, for $135 million.

Eilam’s strategy has been lauded by investors, who have bid up Nice’s share price 90% in the past two years, and in the first quarter net profit climbed 16% to $50 million. But the inContact acquisition will pose integration challenges for Nice, which will be taking on a business with more than 1,000 employees and turnover equal to a quarter of its pre-merger level.

The deal still needs regulatory approval and inContact shareholders’ approval, but Nice said it expected to complete it before the end of the year and that the acquisition will be accretive to earnings on an adjusted basis starting in 2017.