Mitel officials have dropped their $1.96 billion proposal to buy Polycom after declining to raise their bid after a private equity firm offered $2 billion for the video conferencing technology vendor.
Mitel President and CEO Rich McBee said he is disappointed, but that boosting its offer for Polycom wouldn't make sense for Mitel or its investors.
"The agreement announced on April 15 resulted from a detailed due diligence and negotiation process that we feel accurately determined fair value for Polycom," McBee said in a statement. "We feel it would not be in the best interest of Mitel shareholders to adjust the existing agreement."
Polycom officials said in a statement that the company's board of directors had decided to end the acquisition agreement with Polycom after determining that private equity firm Siris Capital's $2 billion offer—made July 7—was superior to Mitel's. Polycom will pay Mitel a $60 million termination fee.
The decisions by Polycom and Mitel end the pursuit of a deal which began in October 2015, when activist investor Elliott Management raised its stakes in both companies and urged their merger, saying it would benefit both shareholders and customers and make a combined company a more competitive player in a rapidly changing enterprise communications space. A merged Mitel and Polycom would have had $2.4 billion in revenue and about 7,700 employees operating in 47 of the world's 50 largest economies. The installed customer base would include more than 82 percent of the Fortune 500 companies, and the merger would have made the company the world's fourth-largest collaboration technology vendor, behind Cisco Systems, Microsoft and Avaya.
Mitel made its official proposal in April in hopes of combining its strengths in unified communications (UC)—with offerings for on-premises, mobile and cloud environments—and Polycom's expertise in conferencing and video collaboration technologies. At the time, Zeus Kerravala, principal analyst with ZK Research told eWEEK that the deal was "a good move for both. Conceptually, it makes a lot of sense. If you look at the two businesses, they're very complementary."
However, two months after Mitel made its offer—and after getting approval for the deal from U.S. regulators—Polycom announced it had gotten a competing offer from an unnamed bidder, and in June said the bidder had upped its offer to about $1.66 billion, less than Mitel's proposal. That bidder, Siris Capital, eventually increased its offer to $2 billion, a number Mitel declined to match.
"We are very excited for the opportunity to partner with Polycom and its leadership team, as the company fits well with Siris' investment focus on mission-critical telecommunications businesses," Siris Executive Partner Dan Moloney said in a statement. "The industry is transitioning to a hybrid on-premise and cloud-based unified communications environment. We believe that, as an independent private company, Polycom would be best positioned to continue its heritage as a best-in-class communications solutions provider to more than 400,000 companies and institutions, channel partners, and the evolving unified communications ecosystem."