More M&A: Covad/MegaPath Merger Partners Invite Speakeasy to the Party

Just a little more than two months after Covad (News - Alert) Communications Co. and MegaPath Inc. announced their intentions to merge, the companies have revealed plans to take their expansion plans up a notch by bringing Speakeasy (News - Alert) into the fold.


The deal with Speakeasy, now a Best Buy company, is expected to close in the third quarter. Financial terms of the planned transaction were not disclosed.

The combination of Covad, MegaPath and Speakeasy will create a next-generation CLEC that can offer customers and partners a full suite of managed IP broadband services over a national network, says D. Craig Young, MegaPath CEO. 

Pat Bennett, president and chief executive officer of Covad, says his company's "intelligent broadband services platform and advanced network capabilities will provide an exceptional foundation for the collective product portfolios of Speakeasy and MegaPath.

"This combination of companies will make these services available to millions of small, medium and large business nationwide directly or through our wholesale partners," he adds.

Speakeasy, which Best Buy bought in 2007 and in which the electronics retailer will continue to be a minority investor in the future, claims more than 30,000 small business customers nationwide. The company has small business expertise, well-developed market channels and technology expertise (especially in VoIP) that will help the combined businesses dramatically accelerate growth, according to Bruce Chatterley (News - Alert), Speakeasy president and CEO. 

Covad is a $400-million company focused primarily on wholesale and offers integrated access, VoIP, wireless (facilities-based WiMAX), T1 and Ethernet. Its MPLS IP backbone connects all its assets nationwide. MegaPath, meanwhile, is probably best known for its MPLS services. 

Following the close of the deals, the new company will include a wholesale operating division and a direct, commercial division. Young of MegaPath will become executive chairman of the combined businesses. Bennett will continue as CEO of Covad Communications. Chatterley will be president of the commercial unit in charge of all non-wholesale customer sales and the marketing division.

This new combination follows several years in which competitive carriers have joined forces to make a stronger play against incumbent carriers and also large competitors. It also is yet another signal that M&A activity is starting to pick up again despite the prolonged economic slowdown. 

GENBAND (News - Alert) earlier this month closed the deal on the Nortel CVAS assets. On March 19 Ciena closed its purchase of Nortel's MEN assets - that is, the Ethernet and optical solutions of the former networking giant.

Equinix (News - Alert) on May 3 announced the closing of its $683.4-million deal to acquire Switch and Data. Shortly after that Cincinnati Bell and ABRY Partners announced plans for the telco to acquire data center operator CyrusOne for $525 million. 

In March, PAETEC revealed its purchase of U.S. Energy Partners LLC in a $3 million deal. Around the same time ABRY Partners signed a definitive agreement for an investment fund it manages to acquire RCN in a deal valued around $1.2 billion.