**Editor's Note: Please click here for Channel Partners' complete coverage of Birch's pending acquisition of Cbeyond.**
Before Cbeyond can go through with its proposed, $323 million sale to Birch Communications, it must secure the approval of its shareholders. And if the deal does not materialize as planned, someone has to pay.
Of course, that's typical legalese in these arrangements so that if something goes awry, there's at least some financial cushion and consolation.
In this case, if Cbeyond backs out, it'll owe Birch a termination fee of $8.1 million. That's including if Birch puts the kibosh on the intended purchase "as a result of a change of recommendation by [Cbeyond's] board of directors or certain other actions in connection with alternative acquisition proposals," Cbeyond told the SEC in an April 21 filing.
Cbeyond would also have to pay that money if it decided against the Birch deal and pursued "an alternative acquisition" with 12 months.
On the other hand, if Birch axes the purchase, or can't get the intended financing from PNC Capital Markets LLC and Jefferies Finance LLC, it will have to pay Cbeyond $16.2 million – double the amount of Cbeyond's back-out terms.
To be sure, that clause gives struggling Cbeyond some protection should it have to return to prospective buyers and plead its case. The service provider has been searching since late last year for "strategic alternatives" as it faces higher quarterly losses and lower stock values despite an ongoing transition from a legacy connectivity focus to cloud and managed services.
Cbeyond stock closed higher on Monday – up almost 39 percent on the Birch news – at $9.81. The 52-week range has oscillated between $5.39 and $9.85.