« It's Time to Build A Mass Movement | Main | CA: Hard Time: CA's Prisons in Crisis »
July 05, 2005
Gores Tech Invests in Phones in Pisons
“This is a great niche market, which represents one of the last domestic hard-line pay phone businesses that will continue to grow”
Gores Tech Invests About $120 Million In Prison Phone Provider
Tuesday July 5, 3:13 PM EDT
NEW YORK -(Dow Jones)- Gores Technology Group has made another bet on the business of providing phone services for prison inmates, acquiring pay-phone operator National Public Markets from AT&T Corp. (T) (T) for less than $120 million.
Gores, Los Angeles, closed the transaction last month and has folded the acquired business into Global TelLink Corp., or GTL, a platform company purchased last year that does the same thing, said Ryan Wald, a Gores principal.
Wald declined to disclose terms of the transaction. But according to a May release from Moody's Investors Service, GTL raised credit facilities totaling $ 97.5 million, which went to finance the acquisition of National Public Markets as well as to pay down debt. Gores put in an additional $22 million of equity, Moody's said.
With trailing 12-months revenue of around $250 million, the combined business accounts for over 10% of the inmate pay phone market, according to Wald.
National Public Markets, Bedminster, N.J., generates 95% of its revenue from operating pay phones at prisons, Wald said. It also runs pay phones at airports, train stations, hotels and conference centers.
The company was a "homegrown" business of AT&T (T) and part of the telecom giant's business services unit, said Gary Morgenstern, an AT&T (T) spokesman. Last July, AT& T (T) said it would shift away from consumer services and focus on business markets and emerging technologies, such as voice over Internet Protocol. Though National Public Markets is part of AT&T's (T) business unit, its users - passengers, hotel guests, conference participants, prison inmates - weren't a focus for AT&T (T), Morgenstern said.
AT&T (T) put the business up for sale and ran an "internal auction" without hiring an investment bank, Wald said. Gores learned of the opportunity through its business development team, which maintains contact with large telecom corporations.
"We believed it's a good fit for GTL," Wald said. Both companies serve state and local prisons and other correctional facilities.
"This is a great niche market, which represents one of the last domestic hard- line pay phone businesses that will continue to grow," Wald said. Pay-phone providers at other venues - airports, train stations, hotels and the like - face competition from cell phone carriers. There is less competition, however, in prisons. "Correctional facilities aren't going to let inmates use cell phones in the near future," Wald said.
This is Gores' first add-on acquisition for GTL, Mobile, Ala., which was acquired last year from Schlumberger Ltd. (SLB) (SLB) for $7.5 million in equity, according to Moody's. The total value of that transaction wasn't disclosed.
GTL is expected to integrate National Public Markets over the next three to six months.
07-05-05 1512ET
Copyright (c) 2005 Dow Jones & Company, Inc.
© 2005 Dow Jones & Company
http://finance.myway.com/jsp/nw/nwdt_rt.jsp?cat=USMARKET&src=704&feed=dji§ion=news&news_id=dji-00058520050705&date=20050705&alias=/alias/money/cm/nw
Posted by lois at July 5, 2005 05:36 PM