Mi­tel’s ac­qui­si­tion of Poly­com called off

Ot­tawa firm’s friendly deal to buy Cal­i­for­ni­abased com­pany falls through af­ter ri­val suitor makes higher of­fer

Ottawa Business Journal - - FINANCE - – OBJ staff

Ot­tawa tech gi­ant Mi­tel an­nounced ear­lier this month its planned US$1.96-bil­lion ac­qui­si­tion of Poly­com is off the ta­ble af­ter the Cal­i­for­ni­abased video-con­fer­enc­ing equip­ment maker re­ceived a higher of­fer from an­other buyer.

Siris Cap­i­tal, a pri­vate eq­uity firm based in New York, now in­tends to buy Poly­com in an all-cash deal that will see it pay US$12.50 per share. In­clud­ing Poly­com’s debt, the deal is val­ued at US$2 bil­lion.

Mi­tel an­nounced the plan to ac­quire Poly­com on April 15 af­ter 10 months of ne­go­ti­a­tion. It was of­fer­ing US$3.12 a share in cash and 1.31 Mi­tel com­mon shares for each unit of Poly­com com­mon stock.

That of­fer was orig­i­nally val­ued at US$13.68 a share. How­ever, Mi­tel shares have dropped in value since then, low­er­ing the value of the over­all deal.

Un­der the terms of the merger agree­ment, Mi­tel had an opportunity to in­crease its of­fer but elected not to do so.

“Mi­tel share­hold­ers, cus­tomers and em­ploy­ees know that we fol­low a rig­or­ous and dis­ci­plined ap­proach to merg­ers and ac­qui­si­tions,” Mi­tel pres­i­dent and CEO Rich McBee said in a state­ment on July 8. “The agree­ment an­nounced on April 15 re­sulted from a de­tailed due dili­gence and ne­go­ti­a­tion process that we feel ac­cu­rately de­ter­mined fair value for Poly­com. We feel it would not be in the best in­ter­est of Mi­tel share­hold­ers to ad­just the ex­ist­ing agree­ment.”

Poly­com will pay Mi­tel a $60-mil­lion penalty for ter­mi­nat­ing the deal.

In April, Mr. McBee said Poly­com’s ex­per­tise in video­con­fer­enc­ing technology would com­ple­ment Mi­tel’s fo­cus on busi­ness voice communications soft­ware, al­low­ing the com­bined firm to grab a larger mar­ket share. The re­sult would have been a firm with 7,700 em­ploy­ees, in­clud­ing about 650 in Ot­tawa, and $2.5 bil­lion in an­nual rev­enues.

“Bring­ing these two com­pa­nies to­gether cre­ates a com­pelling opportunity to un­lock sub­stan­tial mar­ket and share­holder value,” Mr. McBee said at the time.

The deal had also been en­cour­aged by El­liott Man­age­ment, a hedge fund man­age­ment firm that had bought mi­nor­ity stakes in both Mi­tel and Poly­com. How­ever, Mr. McBee has said that ne­go­ti­a­tions be­tween Poly­com and Mi­tel were al­ready un­der­way be­fore El­liott Man­age­ment be­gan push­ing for a merger.

Un­der the plan out­lined in April, Mi­tel would have kept its name, its cor­po­rate head­quar­ters would have re­mained in Ot­tawa and its di­rec­tors would have main­tained a ma­jor­ity on a board that would have in­cluded two seats for Poly­com rep­re­sen­ta­tives. Mi­tel co-founder Terry Matthews would have re­mained board chair­man, Mr. McBee would have re­mained chief ex­ec­u­tive and Steve Spooner would have re­mained chief fi­nan­cial of­fi­cer.

Mr. McBee said he doesn’t ex­pect the lat­est news to have a negative im­pact on Mi­tel’s for­tunes.

“While I am dis­ap­pointed that this par­tic­u­lar trans­ac­tion will not move for­ward, I am con­fi­dent in Mi­tel’s fu­ture as an in­dus­try leader and as a mar­ket con­sol­ida­tor,” he said. “I wish our col­leagues at Poly­com, with whom we have worked closely for the past sev­eral months, on­go­ing suc­cess in the fu­ture.”

FILE PHOTO

Rich McBee is pres­i­dent and CEO of Mi­tel.

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