Less than two months after it agreed in principle to merge with Ottawa-based telecom giant Mitel Networks, voice and video technology communications company Polycom disclosed this week a competing bidder has raised its earlier offer to buy the firm.
In a filing Wednesday with the U.S. Securities and Exchange Commission, San Jose-based Polycom (NASDAQ: PLCM) announced that an unidentified “private equity sponsor” has made an all-cash offer of $12.25 a share for the company in a deal that would take Polycom private.
According to the filing, the transaction would be worth a total of about US$1.6 billion, including $650 million of equity financing and $950 million in debt financing. The potential lender was “highly confident” it could arrange the debt financing, the filing said.
Mitel (TSE: MNW) (NASDAQ: MITL) announced in April that it had agreed to buy the California firm for $3.12 a share in cash and 1.31 Mitel common shares for each unit of Polycom common stock – a deal valued at US$1.96 billion. The merger would create a combined company with 7,700 employees and $2.5 billion in annual revenues.
In Wednesday’s filing to the SEC, Polycom officials said the company “continues to engage in discussions” with the unnamed bidder but added its board of directors remains firmly behind the Mitel proposal.
“Polycom’s board has not changed its recommendation in support of Polycom’s merger with Mitel, and accordingly, Polycom’s board reaffirms its recommendation that Polycom’s stockholders vote in favour of the proposed merger with Mitel,” the company said in the filing.
In a statement issued Wednesday, Mitel reiterated its commitment to the merger, saying the deal "offers certainty of committed financing in an uncertain and volatile debt market, and attractive synergy value. 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."
Back in April, Mitel CEO Rich McBee told reporters the two companies had been discussing a proposed merger for nearly a year. He said Polycom’s expertise in videoconferencing technology would complement Mitel’s focus on business voice communications software, allowing the combined firm to grab a larger market share.
“Bringing these two companies together creates a compelling opportunity to unlock substantial market and shareholder value,” Mr. McBee said at the time.
Under the plan outlined in April, Mitel would keep its name, its corporate headquarters would remain in Ottawa and its directors would still have a majority on a board that would include two seats for Polycom representatives. Mitel co-founder Terry Matthews would remain board chairman, Mr. McBee would remain chief executive and Steve Spooner would remain chief financial officer.
Mitel shares were down about two per cent to $8.39 in early afternoon trading on the Toronto Stock Exchange, while Polycom stock had fallen just over half a per cent to US$12 on the Nasdaq.