Canada’s Mitel Networks Corp said on Friday it would buy fellow voice and telephony gear maker Polycom Inc for about US$1.96 billion in cash and stock, satisfying a demand from activist investor Elliott Management.
Polycom stockholders will get US$3.12 in cash and 1.31 Mitel shares for each of their shares, or US$13.68 based on the closing price of a Mitel common share on April 13.
Shares of Polycom rose 4.3 percent pre-market following the merger announcement, while Mitel’s U.S.-listed shares were down about 2.7 percent.
The deal, worth US$13.44 per share as of Thursday, represents a premium of 9.5 percent to Polycom’s last close and is expected to be accretive to Mitel’s shareholders in 2017.
Upon closing, former shareholders of San Jose, California-based Polycom are expected to hold about 60 percent and current Mitel shareholders are expected to hold about 40 percent of Ottawa-based Mitel’s outstanding shares.
U.S. hedge fund Elliott Management, which has been pushing the companies to merge since October, said on Friday that it supports the Mitel-Polycom deal.
Elliott holds a 6.6 percent stake in Polycom and a 9.7 percent stake in Mitel.
Mitel made the initial approach to buy Polycom, Reuters reported in March, citing sources familiar with the matter.
The combined company will have its headquarters in Ottawa and will operate under the Mitel name while retaining the Polycom brand.
Mitel’s Chief Executive Richard McBee will lead the combined company, while Mitel’s Chief Financial Officer Steve Spooner will continue in that role, the companies said.
Polycom directors will take two seats on the Mitel board, once the deal closes.
Mitel said it plans to finance the cash portion of the deal with cash on hand from the combined business and proceeds from new financing. The company also said it has received about US$1.1 billion of financing from Bank of America Merrill Lynch.
Update: Mitel is a portfolio company of U.S. private equity firm Francisco Partners and Canadian private investment firm Wesley Clover International Corp.
(Reporting by Rishika Sadam in Bengaluru; Editing by Shounak Dasgupta)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Mitel Networks Corp