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Mitel acquires ShoreTel to create second-largest unified communications company

Mitel has announced that it is acquiring rival ShoreTel, to form what it calls the world’s second-largest unified communications as a service (UcaaS) company.

Rather than continuing to operate as a separate company, ShoreTel will be absorbed by Mitel; the new company will have its headquarters in Ottawa, Canada. The deal is worth $430 million, or $7.50 per share: a 28 per cent premium over ShoreTel’s listed stock price.

Once the deal is complete, Mitel will have approximately 4,200 employees and 3,200 channel partners, as well as combined sales of $1.3 billion. UcaaS revenue will be almost doubled, to $263 million.

Mitel CEO Rich McBee said, “This is a very natural combination that enables us to continue to consolidate the industry and take advantage of cost synergy opportunities while adding new technologies and significant cloud growth to our business.”

Interestingly, the deal is worth significantly less than Mitel offered when it first approached its rival in 2014, when it offered $8.10 per share. That offer was rejected because it ‘undervalued’ the company. That may have been true then – ShoreTel shares peaked at more than $10.30 in December 2015 – but times have changed, and they were worth $5.75 earlier this month. ShoreTel could have made much more if it had accepted the first offer.

Mitel intends to pay for the deal using a combination of cash on hand from the combined business, drawings on its existing revolving credit facility and proceeds from a new fully underwritten $300 million term loan, maturing in 2023.

Subject to regulatory and shareholder approvals, the deal is expected to be completed in Q3’17.

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