Mitel Networks, Polycom Said to Be in Advanced Merger Talks

  • An agreement is said to be possible as soon as next week
  • Mitel has market value of $930 million, Polycom $1.5 billion

Mitel Networks Corp. is in advanced merger talks with Polycom Inc., people with knowledge of the matter said, in a deal that would value Polycom at about $1.7 billion.

An announcement from the companies, which provide communications networks, software and other products for businesses, is possible as soon as next week, said the people, who asked not to be identified because the information isn’t public.

The combination being discussed would be structured as Mitel buying Polycom for stock plus some cash, valued at about $12.50 a share, the people said. Polycom shares closed at $10.84 a share Tuesday in New York. Polycom, based in San Jose, California, has a market value of about $1.5 billion. Mitel, based in Kanata, Ontario, has a market value of about $930 million.

There’s no guarantee a deal will get done, the people said.

A representative of Mitel declined to comment. Representatives of Polycom didn’t immediately respond to requests for comment.

Activist investor Elliott Management Corp. said on Oct. 8 it had taken stakes of about $100 million in both Polycom and Mitel and publicly urged them to combine. Elliott said the companies face intense competition from larger rivals such as Huawei Technology Co. and Cisco Systems Inc. and should acquire peers to increase market share.

Greater Scale

The combined company would have sales exceeding $2.5 billion, giving it greater scale and integrated product offerings to better compete with giants such as Cisco, Elliott wrote in October, urging further consolidation of the businesses it classified as unified communications and collaboration vendors.

Cost cuts from the deal would be similar to Mitel’s 2014 acquisition of Aastra Technologies Ltd., where it subsequently reduced combined spending by 7.5 percent, Elliott wrote in October.

Elliott owns about 6.6 percent of Polycom’s shares, making the hedge fund one of the company’s largest stockholders. Elliott is also Mitel’s second-largest investor, with a 9.6 percent stake.

Jesse Cohn, who heads Elliott’s U.S. activist efforts, has focused many of the hedge fund’s shareholder campaigns on enterprise software and technology hardware companies -- often agitating successfully for a sale.

Elliott’s targeted technology companies that have subsequently sold include EMC Corp., Informatica Corp., Riverbed Technology Inc., BMC Software Inc., Compuware Corp., Novell Inc., and Blue Coat Systems Inc., among others. Cohn has also agitated for changes at other technology providers including Citrix Systems Inc., NetApp Inc. and Juniper Networks Inc.

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