Mitel, which under President and CEO Richard McBee has aggressively expanded its business communications capabilities through acquisitions and internal development, is now taking aim at rival ShoreTel, offering to buy the company for $540 million.
Mitel officials said that ShoreTel’s board of directors had rejected an initial bid that was made Oct.2, and that they made a second offer—at the same price—in a letter from McBee to ShoreTel Oct. 20. That offer will stay open until Nov. 20, he wrote.
The CEO said in a statement that the unified communications (UC) market is ripe for consolidation, and that Mitel is determined to be one of the vendors that does the consolidating. Over the past two years, Mitel has rapidly grown through acquisitions, including its $392 million deal last year to buy UC solutions vendor Aastra Technologies, a move that greatly expanded Mitel’s size and market reach and made it into a $1 billion company.
The ShoreTel bid is part of that consolidation strategy.
“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,” McBee said.
He said he was disappointed that ShoreTel’s directors turned down the initial offer, but hopeful they might reconsider. The deal would create a formidable player in the UC space and be a boon to ShoreTel shareholders, he told the board in a letter sent Oct. 20.
“We believe that a transaction between our two companies would be well received by your shareholders, and we are committed to providing them with an opportunity to express their views on our proposal,” McBee wrote.”We have a proven track record of successfully completing and integrating transactions and are firmly committed to bringing the benefits of a combined organization to our respective customers, employees and other stakeholders.”
ShoreTel directors, in a brief statement Oct. 20, confirmed that it had received the “unsolicited proposal” and said they are reviewing it. The company is being advised by Blackstone Advisory Partners and Fenwick and West.
McBee came to Mitel in 2011, and a year later began restructuring a company that was mired in poor financial numbers and dealing with an economy still trying to bounce back from the global recession. The restructuring included cutting 200 jobs—about 10 percent of its workforce—and shuttering some facilities. However, he and other executives then began to rebuild the company via internal work, outside partnerships and acquisitions.
Earlier this month, Mitel announced a new brand that keeps the company name but introduces a new logo that officials said better reflects the growing size of the company and its global reach. In a post on the company blog Oct. 1, Martyn Etherington, chief marketing officer and chief of staff, noted that over the past 18 months, Mitel had more than doubled in size and now powers more than 2 billion connections a day as well as another 33 million cloud communications.
“Our original brand was strong and served us well for 41 successful years,” Etherington wrote. “But it was a heritage brand that stressed our past. … The new brand has a fresh, contemporary feel that we believe is more approachable for customers, partners and employees. And it signifies that Mitel is a software company that provides business communications solutions.”
Mitel Makes $540 Million Bid for ShoreTel
Mitel is operating in a crowded UC market that is in transition as more focus is put on mobility and the cloud, and that includes competitors like Cisco Systems and Microsoft, as well as Avaya, Alcatel-Lucent and Unify, which is expected to launch its new Ansible platform at the end of the month.
Zeus Kerravala, principal analyst with ZK Research, said he believes the offer for ShoreTel has less to do with consolidating the UC space and more to do with the transition to cloud and mobile. In a post on the No Jitter blog site, Kerravala wrote that there is a need for fewer UC vendors—there is too much supply and not enough demand—but that that it would be best done via attrition and not consolidation.
“Having a few vendors actually go away would create share gains for everyone,” Kerravala wrote.
However, ShoreTel officials have been working on creating a single platform that can deliver a single set of features both through the cloud and on-premises solutions.
“To me, this is the value that ShoreTel would bring Mitel,” he 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. There’d only be an upside to come for ShoreTel. The single platform makes shifting to a hybrid model simple, it makes application integration easier, and it should enable a better mobile experience.”