West Corp.'s public offering puts a face on behind-the-scenes operations

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Posted: Monday, March 11, 2013 12:00 am

Most people will never knowingly run across Nebraska's soon-to-be newest publicly traded company.

But West Corp. has probably handled their workplace conference calls, helped route police cars or firetrucks to their emergencies and perhaps even telephoned some to collect a debt.

Omaha-based West said Monday it plans an initial public share offering worth as much as $532 million. The company plans to seek a listing on Nasdaq under the ticker symbol WSTC, joining Berkshire Hathaway, Valmont Industries and TD Ameritrade among the ranks of the city's publicly traded companies.

An employer of 3,700 people in the Omaha area — a total of 35,700 globally — West is the largest U.S. provider of telephone conference calls and is among the leading providers of software to run 911 emergency switchboards.

West generates $2.6 billion in sales a year from behind-the-scenes businesses such as cloud computing and handling customer service telephone inquiries for other companies.

West says its InterCall division handled more conference calls last year — 134 million — than any rival. The Intrado unit is a top provider of the software that gets 911 calls to the correct agency and that tells police officers and firefighters where to go.

West is also hired by doctors, utility companies and government agencies to deliver telephone alerts to customers. The West Asset Management division is licensed as a debt collection business.

The company overall reported a profit last year of $126 million. Profit has more than doubled since 2010, according to filings with the Securities and Exchange Commission.

Monday, West said it plans to sell 21,275,000 shares of common stock to investors at between $22 and $25 a share, making the sale worth $468 million to $532 million. The investment banks arranging the deal and selling the shares to investors will have an option to buy almost 3.2 million more shares if demand warrants. New York-based Goldman Sachs & Co. and Morgan Stanley & Co. are the lead investment banks that structured the sale and will be responsible for selling the shares to investors.

West didn't say when the exact price per share will be decided upon, nor when the offering will go public. West spokesman Dave Pleiss said Monday the company would have no additional comment on any aspect of the IPO announcement or related matters.

In its SEC filing, the company said share-sale proceeds will be used to pay down debt. Debt is high — West Corp.'s $3.9 billion of long-term debt outstrips its $3.4 billion of assets.

Kathy Smith, an IPO analyst with Connecticut-based Renaissance Capital, said investors normally avoid IPOs by companies with more debt than liabilities, a circumstance leading to what Wall Street calls negative book value, or shareholder's deficit.

But some companies encounter such a deficit while still generating large cash flows, she said.

“A company with negative book value that is recapitalized at the time of the IPO may be acceptable to investors if it has very strong and predictable cash flow,” Smith said.

West's businesses generate enormous cash flows. In 2012, West had $663 million of earnings before interest, taxes, depreciation and amortization, or EBITDA. Investors and analysts like to know EBITDA because it suggests a company's profitability minus the impact of financing and accounting decisions.

Tavis McCourt, an analyst for Raymond James who follows teleconferencing and telecommunications companies, said the teleconferencing and call center businesses are probably not going to generate double-digit revenue gains in coming years, calling them mature businesses.

McCourt said there is double-digit growth potential in cloud computer services, or delivering to business customers software, hardware and computer operating systems via the Internet. McCourt also cited West's projections of 7 percent annual growth in 911 system expenditures through 2016, saying that is a prospective source of double-digit sales growth for West.

“In any case, hats off to them for generating impressive cash flows during the recent economic cycle,” McCourt said.

The company's vast array of businesses also include debt collection efforts. The West Asset Management website cites the company's particular expertise with a program it calls DCARE, which specializes in collecting debts from the estates of people who have died.

The company will have about 83 million shares outstanding after the offering, according to SEC filings. At the middle prospective offering price of $23.50 a share, the 2012 profit of $126 million implies a price-to-earnings ratio of about 15. That is about level with that of the members of the Standard & Poor's 500 and slightly lower than that of Premier Global Services, an Atlanta-based publicly traded company that specializes in conference calls.

West’s corporate headquarters is at 11808 Miracle Hills Drive in Omaha, a 108,000-square-foot office building in a business park near Interstate 680 and West Dodge Road. The firm also owns the newer 126,000-square-foot office building at 11650 Miracle Hills Drive and a parking garage in the same complex. Its human resources staff members are in a 14,620-square-foot building West owns at 11810 Nicholas St.

The company was started in Omaha in 1986 by Omaha resident Mary West and a partner. Gary West joined the firm in 1987. Both Wests were veterans of First Data Resources.

The new company's initial thrust was answering customer service inquiries on behalf of other companies who wanted to hire someone else to take care of it. A series of acquisitions — $2.7 billion worth since 2002 — led to growth.

The company was publicly traded once before after selling shares in 1996. In 2006, the company was taken private by Thomas H. Lee Partners LP and Quadrangle Group LLC for about $4 billion.

Gary and Mary West and New York-based Quadrangle Group each own about 12 percent of the company. Boston-based Thomas H. Lee Partners now owns about 58 percent of West. Chief Executive Thomas Barker owns about 1 percent. The share sale prospectus says the insiders have agreed to not sell their shares for six months after the offering, barring certain exceptions. After the share offering, the Wests and Quadrangle will own about 9 percent of the stock and Thomas H. Lee about 44 percent.

West's 2012 revenue of $2.6 billion missed the Fortune magazine 500 list of largest publicly traded companies. It was ranked 795th in the Fortune 1000 in 2012 and as the 183rd-largest private company that year by Forbes magazine.

David Brown, chief executive of the Greater Omaha Chamber of Commerce, said large publicly traded companies give a city “bragging rights” when it comes to touting a diverse and vibrant economy. Five Fortune 500 firms call Omaha home.

“We use the Fortune 1000 and Fortune 500 headquarters lists as indicators of diversity and strength of the Omaha economy,” Brown said. “That would give us another thing to brag about.”

Brown said West executives have been an “active player” in chamber events and in efforts to recruit other firms to the metro. And West has contributed to the chamber's lobbying efforts at the State Legislature on issues related to telecommunications, data centers or customers service centers.

“As a corporate citizen, they are willing to move the bar when we need them to,” Brown said.

Contact the writer: 402-444-3133, russell.hubbard@owh.com

West Corp. through the years

1978: Gary and Mary West co-found WATS Marketing of America, which they sell to First Data Resources in 1980. They remain with the company until 1985.

1986: Mary West and Troy Eaden, also formerly with WATS, found West TeleServices, an inbound telemarketing service bureau. Gary West joins the following year as chairman of the board after his non-compete agreement expires.

1989: Eaden becomes the company's principal executive, taking the title of CEO in 1995, the same year Tom Barker is promoted to president and chief operating officer.

1996: West has 2,000 employees in Omaha. The company initiates its first public offering in November, proposing to sell 5.7 million shares and ultimately realizing net proceeds of $107.7 million.

1998: Barker is promoted to CEO

2001: West Corp. is now the city's 12th-largest employer with 4,000 employees in Omaha. It announces plans to build a $35 million corporate campus near Miracle Hills Drive, where it already has three buildings.

2002: West makes its first three acquisitions: Tel Mark Sales Inc. of Appleton, Wis.; Dakotah Direct II LLC of Spokane, Wash.; and Attention LLC, an Atlanta collection firm with call centers in Jamaica. The three represent an investment of $125 million.

2003: West enters the electronic conferencing business by acquiring InterCall, a Chicago company that sells audio, video and Web conferencing services, for $388 million. West acquires Texas firm ConferenceCall.com for $36 million.

2004: West acquires debt-collection agency Worldwide Asset Management LLC of Marietta, Ga., for $133 million, followed by ECI Conference Call Services LLC of Wayne, N.J., for $53 million.

2005: West buys Sprint Corp.'s conferencing business for $207 million.

2006: In May, West, at the time employing 2,400 in Omaha, announces it has been bought out by private investors in a $4.1 billion deal. Gary and Mary West together retain nearly a 25 percent stake in the firm after the sale. They move to San Diego, but maintain a home in Omaha and visit regularly on behalf of their Gary and Mary West Foundation to meet with grant recipients. The Wests also own several businesses in the hospitality industry in the San Diego area, including a steakhouse and hotel, and are active in Thoroughbred horse racing.

Also in 2006, West buys Intrado, a Colorado provider of 911 call services, for $480 million, and Colorado conferencing company Raindance Communications for $113 million, followed by InPulse, which generates sales to consumers who respond to direct-response marketing, for $46 million.

2007: Acquisitions include TeleVox, a provider of communication and automated messaging services to the health care industry, for $129 million; Omnium Worldwide Inc., an Omaha company specializing in debt collection for businesses, for $139 million; and alerts and notifications business CenterPost for $22 million.

2008: Acquisitions include Genesys SA, a French global multimedia collaboration service provider, for $322 million; Positron Public Safety Systems, a Canadian 911 call services business, for $155 million; and HBF, an emergency management services firm, for $19 million.

2009: Acquisitions include conferencing businesses Corvent for $4 million and Stream57 for $28 million.

2010: West makes four acquisitions for a total of $33 million; the largest is TuVox, with interactive voice response technology, for $16 million.

2011: West makes six acquisitions for a total of $216 million; the largest is Smoothstone, which becomes West IP Communications, for $120 million.

2012: Acquisitions include HyperCube, a provider of switching services to telecommunications carriers, for $78 million.

2013: West has locations in 21 states and 11 other countries. On March 11, it announces plans to offer 21.27 million shares of common stock, expecting to raise $468 million to $532 million.

Sources: West Corp., Securities and Exchange Commission filings, World-Herald archives

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