Mitel to acquire Mavenir for $560 million

Mitel announced Monday it has acquired software-based networking solutions provider Mavenir in a $560-million cash and stock deal chief financial officer Steve Spooner said will transform the company, positioning it to take advantage of where the global communications market is going.

“Personally, I’ve never been more excited than I am today being at Mitel,” Mr. Spooner said.

In an interview last week with OBJ, Mitel CEO Rich McBee said it was important to “skate to where the puck is going, not skate to where it is.”

According to Mr. Spooner, the puck is being dumped into the mobile corner, where Mavenir has positioned itself with its elbows high.

“We can all see the world is going mobile and ultimately people want their mobile device, they want to be able to do everything on it,” he said. “They want business-type services on a mobile device and that’s very much the kind of products and services that Mavenir is offering.”

Mitel (TSX:MNW)said in a release the acquisition should allow it to “capitalize on increasing demand for 4G LTE services,” expanding its total addressable market by $14 billion by 2018.

"We believe the combination of Mitel and Mavenir creates a powerful new value proposition for enterprises and mobile service providers,” Mitel CEO Rich McBee said in a statement, adding that with demand for next generation mobile devices on a sharp incline, the acquisition was “a compelling opportunity to capitalize on a major market transition to add a high-growth mobile business.”

The Texas-based Mavenir (NYSE:MVNR) currently has 15 of the top 20 mobile carriers in the world included among its more than 130 mobile customers. Once the deal closes, it will become Mitel’s mobile business division, still operating under the Mavenir brand. Its CEO, Pardeep Kohli, will join Mitel as Mavenir president, reporting to Mr. McBee.

“We believe that the combined company is ideally positioned to capitalize on the trends within the communications industry today; namely, the convergence across enterprise and mobile networks to all-IP technologies, and the transition to cloud-based unified communications telephony and software-defined virtualized infrastructure," Mr. Kohli said.

The announcement was made in Barcelona at the World Mobile Congress and Mr. Spooner said the reaction was swift, and positive. He said as impressive as Mavenir’s success has been, it is still a relatively young, and small company. It’s a big risk, according to Mr. Spooner, for a carrier to design offerings from small companies into its network, because there’s a real chance those companies will disappear.

“The reaction over in Barcelona today … the carrier community is saying this is terrific news. ‘Mavenir, you’ve addressed our number one concern which was your lack of scale,’” Mr. Spooner said.

Mr. Spooner said discussions between the two companies began in the second half of 2014 and it didn’t take long to realize there was a good fit for both sides.

He said the deal will not change the daily operations in Ottawa, other than the fact Mitel wants its engineers to work along with Mavenir’s on new product design.

“We really want to unleash the teams and start exploring what are the possibilities that we can do together?” Mr. Spooner said.

The deal is expected to close in the second quarter of this year.