Prison Phone Company Securus Is in SPAC Merger Talks
Prison Phone Company Securus Is in SPAC Merger Talks
(Bloomberg) -- Tom Gores’s Platinum Equity is exploring strategic options for one of its most controversial investments, prison phone operator Securus Technologies Inc., and is in talks to take it public through a merger with a blank-check company, according to people with knowledge of the matter.
Atlantic Avenue Acquisition Corp., formed by middle-market lender MC Credit Partners, has approached Platinum about a potential deal to merge with Securus, said the people, who asked not to be identified because the discussions are private.
The discussions are in the early stages and Platinum could still consider a sale to another buyer or an initial public offering for Securus, or it could opt to keep it, the people said.
A representative for Beverly Hills, California-based Platinum declined to comment. Atlantic Avenue and Stamford, Connecticut-based MC Credit Partners didn’t respond to requests for comment. Securus didn’t respond to a request for comment.
Special purpose acquisition companies, or SPACs, like Atlantic Avenue raise funds through IPOs for the purpose of completing a yet-to-be-defined acquisition, typically within two years.
SPAC listings have skyrocketed since the start of 2020, creating stiff competition for acquisitions and putting pressure on managers to find deals before they have to return money to their investors.
Taking Securus public would allow Platinum and its founder Tom Gores to lessen their exposure to the prison industry, which has attracted increasing criticism in recent years for profiting from mass incarceration and immigrant detention. Social justice activists have called on private equity firms, investment managers and pension funds to divest from private companies that operate in correctional facilities.
Prison services company like Securus have generally faced less opposition than private prison operators such as CoreCivic Inc. and Geo Group Inc., with which several major banks have pledged to cut business ties.
Yet as investors and financial institutions sharpen their focus on environmental, social and governance issues, some vendors that primarily serve correctional facilities have also faced higher borrowing costs.
Activist Target
Securus and some of its competitors have been criticized for charging families of incarcerated people as much as $25 for a 15-minute phone call. A majority of those proceeds are often paid back to the facilities as commission and have become a key source of funding for prisons and jails across the U.S.
Platinum has said that during its ownership of Securus, it has lowered the average cost of phone calls and is committed to working with regulators to make the company’s services more affordable. In 2019, Platinum reorganized Securus’ assets under the new corporate umbrella of Aventiv Technologies. Dave Abel, who jointed Securus as president that year, was named chief executive officer of Dallas-based Aventiv in 2020.
In spite of these changes, the company has remained a target for social justice activists and regulators including the Federal Communications Commission and the Consumer Financial Protection Bureau.
This month, a subsidiary of Aventiv that offers payment services, agreed to change some of its business practices and pay $6 million in fines and restitutions to settle claims brought by the CFPB that it burdened former detainees with “unfair fees” to access release money.
In another blow to Securus, the FCC earlier this year lowered the maximum rates that prison phone companies can charge for out-of-state calls.
Atlantic Avenue raised more than $250 million through its listing in October of last year, including an overallotment option. The SPAC is run by Ashok Nayyar, a former Morgan Stanley and Citigroup Inc. banker who now serves as the chief investment officer of MC.
Platinum acquired Securus for $1.6 billion in 2017 from ABRY Partners.
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