ShoreTel's board of directors has again rejected rival Mitel's acquisition attempt, calling the $540 million bid inadequate and opportunistic.
Mitel officials earlier this month went public with their Oct. 20 letter from President and CEO Richard McBee to the ShoreTel directors, saying the offer would stay on the table until Nov. 20.
However, ShoreTel announced Oct. 27 that the board unanimously rejected Mitel's unsolicited offer, saying that it undervalued ShoreTel and didn't take into account what the company has done in improving its financial picture and its product roadmap, which includes the launch of a common UC platform for on-premises, cloud and hybrid environments.
"We believe Mitel's proposal is financially inadequate, is an opportunistic attempt to acquire ShoreTel's assets, and is not in the best interests of ShoreTel stockholders," ShoreTel board Chairman Chuck Kissner said in a statement. "Mitel's opportunistic offer attempts to acquire ShoreTel just before its most significant new product launch, while ShoreTel's business is transforming from a model largely based on one-time product and software sales to a recurring revenue model driven by its growing hosted services business, and only shortly after it has expanded its channel partner program to target growth in cloud-based solutions."
During McBee's tenure, Mitel has rapidly restructured and expanded its business, both through internal development and outside acquisitions, the most significant of which was its $392 million purchase of Aastra Technologies in 2013. The move greatly expanded Mitel's size and market reach and made it a $1 billion company.
In the letter to ShoreTel, McBee said the UC market is primed for consolidation and that Mitel bringing ShoreTel into the fold would benefit both companies.
"We see a compelling opportunity to bring together two market innovators with strong and complementary market footprints, particularly in the U.S., where ShoreTel does more than 90 percent of its business, in a way that delivers significant value and opportunities to the shareholders, customers and employees of both companies," the CEO wrote.
However, ShoreTel President and CEO Don Joos said his company is making progress with its various strategic initiatives, from accelerating growth to building out its roadmap.
"We are confident that we have the right people, technology and products in place to execute our strategic plan and deliver significant value to our stockholders, and that the continued execution of this strategic plan will deliver substantially more value to ShoreTel stockholders than Mitel's inadequate proposal," Joos said in a statement.
ShoreTel officials noted that the company has grown income and sales over the past six quarters, including growing recurring revenue to 39 percent of all revenue. In addition, the company is expecting to launch its much-anticipated common UC platform in April 2015, ahead of the initial schedule. In a conference call Oct. 23 with analysts and journalists to discuss quarterly financial numbers, Joos said the common platform technology will enter the alpha stage in December before launching four months later.
"Once it's available, the common platform will enable all of our customers to access the same ShoreTel solution in a cloud premises for hybrid environment, whichever best suits their business needs," Joos said, according to a transcript on Seeking Alpha. "Our customers will enjoy a consistent user experience due to the common platform, coupled with the utilization of common applications and endpoints. At that time, our premise customer installed base representing over 3.5 million end-users will be able to migrate to cloud at the pace they choose."
He declined to discuss the Mitel bid during the call, noting at that time that the offer was being evaluated by the company's board.
In a post on the No Jitter blog after Mitel made its offer for ShoreTel public, Zeus Kerravala, principal analyst with ZK Research, said it was more ShoreTel's common platform than industry consolidation that interested Mitel.
"To me, this is the value that ShoreTel would bring Mitel," Kerravala wrote. "If one believes that hybrid is the future, and if one also believes that ShoreTel's single platform is a differentiator, then the [$540 million] price that Mitel has offered for ShoreTel is an absolute bargain. … The single platform makes shifting to a hybrid model simple, it makes application integration easier, and it should enable a better mobile experience."