Mitel Networks Corp (TSX: MNW) has agreed to sell its mobile division to Xura Inc, a portfolio company of U.S. private equity firm Siris Capital Group. In exchange, Mitel will receive $350 million in cash, a $35 million non-interest bearing promissory note, and an equity interest in the partnership that will own both Xura and the mobile business. The deal is expected to close in Q1 2017. Ottawa-based Mitel said the decision to sell is strategic and will allow it to refocus on the unified communications and collaboration (UCC) market. Earlier this year, Siris Capital acquired Polycom Inc, which had previously agreed to merge with Mitel.
Mitel Signs Definitive Agreement to Divest Mobile Business
Announces intent to implement share buyback program
Refocuses on UCC market as digital transformation accelerates premise to cloud transition
Reduces gross leverage from 3.3x to 1.8x on a proforma basis and improves cash flow to drive shareholder value
Strengthens Mitel’s financial foundation for future expansion in the enterprise market
OTTAWA, Dec. 19, 2016 (GLOBE NEWSWIRE) — Mitel® (Nasdaq:MITL) (TSX:MNW), a global leader in real-time business, cloud and mobile communications, today announced that it has entered into a definitive agreement to divest its mobile division to the parent company of Xura, Inc. for $350 million in cash, a $35 million non-interest bearing promissory note and an equity interest in Sierra Private Investments L.P., the limited partnership that will own both Xura and the mobile division. The cash portion of the purchase price is subject to adjustments for closing working capital and indebtedness.
Today’s announcement reflects a strategic decision made during Mitel’s recent annual business review to refocus the company exclusively on the Unified Communications and Collaboration (UCC) market as digital transformation accelerates demand for cloud-based business communications solutions globally.
“In a period of rapid change and massive technology transitions, scale and focus are key to driving growth and shareholder return. This transaction will allow Mitel to achieve these goals,” said Rich McBee, CEO of Mitel. “It also enables us to intensify our focus and capital in expanding our leadership position in the enterprise market as it prepares for large scale digital transformation of premise-based systems to the cloud. Employees and customers of the mobile division will benefit by being part of a large carrier-focused company with the size, scale and support infrastructure needed to truly compete for and drive the next wave of 4G/5G innovation.”
With respect to shareholder value, Mr. McBee commented, “Simultaneous with our decision to monetize the mobile business, we initiated an evaluation of how to drive value for shareholders. Following the completion of the sale of the mobile division, Mitel will be significantly de-levered, more focused, and will have a number of meaningful options available to us to generate shareholder value. Further, we believe Mitel shares are substantially undervalued and, as a result, we intend to implement a share buyback program in conjunction with a full evaluation of our capital structure. We are working with our Board and financial advisors and will announce details in the near-term.”
The sale of the Mobile division is expected to close in the first quarter of 2017, subject to obtaining necessary regulatory approvals and other customary closing conditions. The transaction is not subject to any financing condition. The cash proceeds from the sale will be used to pay down Mitel’s existing credit facility, reducing the company’s gross leverage ratio from 3.3x to 1.8x, and net leverage to 1.3x on a proforma basis. As a result of the divestiture, Mitel expects to record a significant write-down of goodwill relating to the transaction in the fourth quarter of 2016.
Mitel’s Board of Directors has approved the sale of the Mobile division as well as, subject to regulatory approval, a share buyback program pursuant to a normal course issuer bid under Canadian securities laws and in compliance with safe harbours under applicable U.S. securities laws. Proceeds from the sale of the Mobile division will not be used to repurchase Mitel shares.
Conference Call Information
Mitel will host an investor conference call and live webcast today at 8:30 a.m. ET ( 5:30 a.m. PT) to discuss the divestiture of its Mobile Division. To access the conference call, dial 888-734-0328. Callers outside the U.S. and Canada should dial 678-894-3054. The conference ID is 39334514. The live webcast will be accessible on Mitel’s investor relations website at www.mitel.com. The call will be archived and available on this site for replay until 5:00 p.m. ET on Friday, January 13, 2017.
A global market leader in enterprise and mobile communications powering more than 2 billion business connections and 2 billion mobile subscribers every day, Mitel (Nasdaq:MITL) (TSX:MNW) helps businesses and mobile carriers connect, collaborate and provide innovative services to their customers. Our innovation and communications experts serve more than 60 million business users in more than 100 countries. For more information, go to www.mitel.com and follow us on Twitter @Mitel.
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Xura, Inc. offers a portfolio of digital services solutions that enable global communications across a variety of mobile devices and platforms. Xura helps communication service providers and enterprises navigate and monetize the digital ecosystem to create innovative, new experiences through its cloud-based offerings. Xura’s solutions touch more than three billion people through 350+ service providers and enterprises in 140+ countries. You can find more information at www.Xura.com.
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