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 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.”
Rich McBee is president and CEO of Mitel.