Fusion Telecommunications Int'l, Inc. (NASDAQ:FSNN) Making Strategic Moves

On August 28, 2017, Fusion Telecommunications Int'l, Inc. (NASDAQ:FSNN), surprised the market by releasing that it was acquiring the Cloud and Business Services segment of Birch Communications. Reacting to the news, the share price jumped astonishingly.Three days before the announcement, the share was trading at $1.23 and on August 30, 2017, the share price touched the level of $2.95, a 260% jump. On top of it, more than 5 million shares changed hands in the days following the announcement. Thus we became much interested in the stock and commenced to perform due diligence. Before we let you know what we found, have a look at the recent share price action: 1 year chart for FSNNBusinessFSNN is a New York based Internet service provider company employing 306 full time workers. The company provides services such as cloud communications, cloud connectivity, cloud computing, and additional cloud, such as storage and security services, to small, medium, and large businesses. It is known for its cost friendly cloud services platform. Company LogoThe following financial year has been a fruitful one for Fusion Telecommunications International, Inc., as it is emerging to be one of the top integrated cloud solutions providers to small, medium, and large businesses in America. The acquisition of Birch Communications and the Joint Venture with XComIP, LLC, are expected to create strides on the integrated cloud solutions market.Recent DevelopmentsOn June 12, 2017, Fusion Telecommunications International, Inc. announced that it has reached an agreement with XComIP, LLC, to create Fusion Global Services, LLC; a newly formed company organized to provide voice services to carriers worldwide. The press release also stated that it expects the transaction to be closed before the end of 2017. This joint venture is expected to push the profitability of the firm further, as it will considerably reduce the operational cost of the business. Matthew Rosen, the CEO of Fusion, commented:

“The benefits of our newly combined entity and to Fusion on a consolidated basis are a 'win-win' from a financial and operating perspective. We also believe the proposed transaction will enhance shareholder value as we reduce costs and increase profitability.” Source

Additionally, Jay Adams, CEO of XComIP, stated the following about the transaction:

“We recognize the tremendous synergies between the customers and vendors of our organizations, and we see immediate opportunities for strong and profitable growth as our companies come together.” Source

On July 18, 2017, Fusion Telecommunications International, Inc. announced that it secured a three-year, $350,000 cloud communications solution contract with an international self-storage company. Fusion Telecommunications International, Inc. consider this as a big success. Russell P. Markman, Fusion's President of Business Services, said:

"As market conditions change and we find more and more legacy service providers exiting the business, Fusion's single source cloud solutions are gaining increasing acceptance by enterprises seeking an experienced, trusted a partner to help them successfully migrate to the cloud .” Source

On August 28, 2017, Fusion Telecommunications International, Inc. announced that it is acquiring the Cloud and Business Services segment of Birch Communications in a stock only transaction. Birch Communications and Fusion Telecommunications International, Inc. are expected to combine and create one of the largest cloud services providers in North America, with more than 150,000 business customers.

1 month chart for FSNN

Additionally, it was noted that the transaction is expected to be "accretive to Fusion’s adjusted EBITDA immediately upon closing, generating positive free cash flow while dramatically reducing the company’s overall leverage ratio." Furthermore, $20 million of cost synergies are expected to be achieved within 12 months of closing. Since the announcement was very significant, we researched the conditions of the merger.

"Converted into the right to receive, in the aggregate, that number of shares of Fusion common stock equal to three times the number of shares of (i) Fusion common stock, par value $0.01 per share (“Fusion Common Stock”) issued and outstanding immediately prior to the Effective Time" Source

We could also read that approximately 73 million common shares of Fusion will be issued in connection with this transaction, valued at $3.85 per share. Finally, it is always good to note that all members of Fusion’s Board of Directors have signed a support agreement to vote their aggregate 10.5% interest in favor of the transaction.On August 31, 2017, Vista Partners published Macroeconomic & Investment Monthly Newsletter for the month of August. The report highlighted the future of Cloud Services companies and mentioned Fusion Telecommunications International, Inc. as one to look out for in the future.HoldersWe had a look at the market participants that acquired big stakes before the jump:HolderSharesDate Reported% OutValueUnterberg Capital LLC3,547,948Jun 29, 201715.83%5,073,565United Capital Financial Advisers, LLC417,172Jun 29, 20171.86%596,555Spears Abacus Advisors LLC200,000Jun 29, 20170.89%285,999B. Riley Financial, Inc.100,000Jun 29, 20170.45%142,999Kemper Corporation90,555Jun 29, 20170.40%129,493Geode Capital Management, LLC48,146Jun 29, 20170.21%68,848SourceThese are other market participants with large stakes:HolderSharesDate Reported% OutValueFidelity Extended Market Index Fund48,146May 30, 20170.21%72,219Vanguard Total Stock Market Index Fund31,290Mar 30, 20170.14%51,002Claymore ETF Tr-Wilshire Micro Cap ETF7,041May 30, 20170.03%10,561SourceConclusionFSNN seems to have excited the market with its current acquisition. In this piece, we saw that the combination is expected to be promising. We believe that the $20 million of cost synergies noted by the company is a game changer and moves the combined company to profitability. Overall, the transaction makes FSNN one of the top small cap cloud companies for investors. We will be updating our subscribers as soon as we know more. For the latest updates on FSNN, sign up below!Image courtesy of Solunus Inc FlickrDisclosure: We have no position in FSNN and have not been compensated for this article.