eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
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.”
Mitel Ends Bid for Polycom After Competitor Offers $2 Billion Deal
The moves involving Polycom reflect a collaboration market in a state of flux as vendors look to address new and growing demands brought on by such trends as greater workforce mobility, bring-your-own-device (BYOD), the Internet of things (IoT) and the cloud. The changes in the market over the past few of years include Nokia buying Alcatel-Lucent, Siemens Enterprise Communications becoming Unify and then being bought by Atos, ShoreTel releasing its Connect common UC platform, Avaya restructuring its leadership team and growing its services capabilities, and Lifesize moving aggressively to the cloud and spinning out of Logitech as an independent company.
The bid for Polycom was in line with McBee’s goals of building a larger Mitel that is a more significant player in the enterprise communications space with greater capabilities in mobility and the cloud. About one in 10 Mitel customers use video, he said at the time the bid was announced, adding that having video in place will help the vendor expand its reach in the market.
Since taking over as CEO in 2011, McBee has argued that the communications space was ripe for consolidation and that Mitel would be a buyer rather than a seller. During his tenure, Mitel has bought Mavenir Systems and Aastra Technologies to broaden its mobility and cloud ambitions. In addition, Mitel in 2014 sought to buy UC vendor ShoreTel, but pulled its $574 million offer off the table after ShoreTel officials dismissed the offer as undervaluing their company.
Shareholders for both Polycom and Mitel were scheduled to vote on the deal July 29. Polycom cancelled its special stockholder meeting, but Mitel officials said the company was going ahead with its shareholder meeting, though a vote on buying Polycom was no longer on the agenda.