- Private equity firm offers $12.50 a share, a 14% premium
- Mitel agreed in April to buy Polycom in $1.96 billion deal
Polycom Inc. agreed to end its merger pact with Mitel Networks Corp. and accepted an offer from private equity firm Siris Capital Group valued at about $2 billion, opting for an all-cash bid that will allow it to remain somewhat independent.
Siris offered $12.50 a share in cash for the video-conferencing company, according to a statement Friday. Including Polycom’s outstanding debt, Siris’s offer represents a premium of 14 percent to Mitel’s bid, based on Mitel’s closing share price as of July 7, according to the statement. Shares in Polycom and Mitel surged.
Canadian technology pioneer Mitel had agreed in April to buy Polycom for a mix of cash and stock in a deal valued at about $1.96 billion, as it sought to add video conferencing and expand in business communications. But a month later, Polycom received an offer from Siris, valuing the deal at $14.50 a share. Mitel said at the time that it determined the proposal wouldn’t lead to a superior offer. Polycom’s board reviewed the offer separately, rejected it and declined to engage further, according to a regulatory filing in May.
“We believe this is a better outcome for all involved,” Tavis McCourt, an analyst at Raymond James, wrote in a note. “The Mitel and Polycom combination brought with it significant longer-term strategic risks that may have impacted Mitel’s chance of success long term, while maintaining its independence from a telephony/call processing platform such as Mitel will enable Polycom to maintain its neutral/third party position in both the video and voice and point business.”
Linking up with a private equity firm will also allow Polycom to remain a largely independent operation amid a swirl of deals in the enterprise IT market. Some recent examples include Cisco’s purchase of Acano for $700 million earlier this year and International Business Machines Corp.’s purchase of Ustream Inc.
Siris’s purchase last year of Premiere Global Services Inc., also “brings with it some intriguing opportunities for Polycom to cross-sell, at the very least, and provide a unified, more holistic bundled hardware, software and services collaboration solution if Siris were to integrate the two over time,” McCourt said.
The agreement announced Friday is subject to Polycom ending its existing merger pact with Mitel and paying a termination fee of $60 million. Polycom said its board agreed that the Siris proposal was “superior” to the one from Mitel. It expects the deal to close in the third quarter.
Polycom shares surged as much as 13 percent to $12.30, the biggest intraday increase since October, while Mitel jumped as much as 20 percent to $7.23, the most since January.