US LEC Buys Interpath Customers

US LEC, a CLEC with over $50 million in quarterly revenue, is looking for "bite-sized" acquisitions that will add to the bottom line without disrupting operations.

by Alex Goldman ISP-Planet Associate Editor [October 24, 2002]

US LEC announced that it is acquiring more than 150 data customers from Interpath Communications, a Research Triangle Park, N.C.-based ASP. Interpath is in the process of merging with Annapolis, Md.-based USi and reports that it is selling its data customers because they are ancillary to the applications hosting business that will be the focus of the merged venture.

The merger of Interpath and USi was announced earlier this year when Boston-based Bain Capital invested $81.25 million in USi to lead the financially troubled ASP out of Chapter 11 bankruptcy protection. Bain also owns a controlling interest in Interpath.

Charlotte, N.C.-based US LEC (Nasdaq: CLEC) is a large competitive local exchange carrier (CLEC) providing services in the Southeastern and Mid-Atlantic U.S. Its services include local phone, long distance phone, calling card, toll free, dedicated Internet, digital private line, and frame relay. The company also provides managed services for more than 3,000 select business clients.

The deal is not a large one for the company. Instead, it is a signal that the company is interested in small acquisitions that will grow its business but be easy to integrate.

"With this announcement," said Aaron D. Cowell, Jr., US LEC president and CEO, "we want to do three things. First, we want to get the message out to our new customers. Second, we have always grown organically and we want people out there to know we're here and we're healthy. Third, our investors need to know that although we are interested in bite-sized acquisitions, we are not on a binge."

It certainly is a bite-sized acquisition, but it is not insignificant. In its last quarter, the company recorded over $56 million in revenue. If each new customer is paying $1,000 per month in services, the acquisition will add about $1.8 million in annual revenue to the company. Financial terms of the deal were not disclosed.

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