Mitel's plan to buy video conferencing vendor Polycom for $1.96 billion just got a little more complicated.
In a filing with the Securities and Exchange Commission (SEC) May 23, Polycom officials said the company has received a revised offer from an unnamed private equity firm that could be "superior" to Mitel's bid.
In the Form 8-K filing, Polycom officials noted that on May 13, Mitel filed a document with the SEC noting that the private equity firm had a made an offer for Polycom. Since then, a revised offer had come in from the firm—referred to in the filing as "Sponsor 1"—that "could reasonably be expected to lead to a 'Company Superior Proposal' as defined in Polycom's merger agreement with Mitel."
Polycom officials said they intend to talk with Sponsor 1 regarding the revised proposal.
In a statement, Mitel executives noted that the boards of directors for both Polycom and Mitel had approved the deal with Mitel, and that large shareholders from both companies had committed to the deal. They also argued that Mitel's bid "offers superior and greater upside to both Polycom and Mitel."
In particular, Polycom shareholders will own 60 percent of a $2.4 billion company, they said.
"Mitel's acquisition of Polycom continues to be the best path forward and best strategic choice to create shareholder value, driven by attractive financial and operational scale," they wrote.
Mitel executives announced the deal in April, hoping to create a larger communications and collaboration company that can compete with dominant vendors like Cisco Systems, Microsoft and Avaya. The communications market is a volatile one, with a growing number of acquisitions—such as Nokia buying Alcatel-Lucent—and vendors remaking their portfolios to meet the growing demand among businesses to take advantage of the cloud, the trend toward bring-your-own-device (BYOD) and their increasingly mobile workforces.
The idea of a Mitel-Polycom deal was first broached in October 2015, after officials with hedge fund Elliott Management increased their investment in both companies and began urging the vendors to merge. Elliott holds about a 9.7 percent stake in Mitel and a 6.5 percent piece of Polycom.
A merged Mitel and Polycom not only would have $2.4 billion in revenue, but also about 7,700 employees operating in 47 of the world's 50 largest economies and an installed customer base of more than 82 percent of the Fortune 500 companies. Mitel officials also have said it would be among the top vendors in such markets as business cloud communications, conference phones, video conferencing and installed audio.
According to the SEC filing, Sponsor 1's revised proposal includes giving Polycom shareholders a cash dividend of $11 per share and the buyer would purchase $650 million in shares of a new convertible preferred stock of Polycom.
Polycom directors have not changed their recommendation to support the Mitel deal and is not approving or endorsing Sponsor 1's proposal, officials said in the filing.
The revised offer comes less than a week after the Federal Trade Commission terminated the waiting period under the Hart-Scott-Rodino antitrust act, removing a hurdle to the proposed merger. Mitel officials hope to close the deal in the third quarter.