Rich McBee - CEO, Mitel
Mitel has announced plans to acquire ShoreTel in a US$530 million deal, creating a multi-billion dollar unified communications powerhouse in the process.
Targeting the unified communications-as-a-service (UCaaS) market, the acquisition - which is expected to close in the third quarter of 2017 - will see the vendor become the second largest player in the industry.
Specifically, the agreement will see Mitel acquire 100 per cent of the outstanding shares of ShoreTel common stock in an all-cash transaction at a price of US$7.50 per share, or a total equity value of approximately US$530 million and a total enterprise value of approximately US$430 million.
According to financial reports, the purchase price represents a 28 per cent premium to ShoreTel's closing share price on July 26, 2017.
Terms of the deal will also see the combined company headquartered in Ottawa, Canada, operating under the Mitel name with Rich McBee appointed CEO.
“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,” Mitel CEO Rich McBee said.
“Together, Mitel and ShoreTel will be able to take customers to the cloud faster with full-featured, cloud-based communications and applications.”
Aiming to be “stronger together” in the rapidly expanding UCaaS market, McBee said the deal allows Mitel to accelerate cloud strategy plans across the world, as the vendor taps into growing digital transformation demand.
In taking up the number two spot in the UCaaS market, McBee said the combined entity will create a supplier with the “scale and technical capabilities” to enable customers with new cloud-based solutions and applications.
From a channel perspective, the combined company will have approximately 3,200 channel partners, backed up by an expansive portfolio of communications and collaboration solutions.
Despite a lack of confirmation at this stage, both parties are expected to reassess go-to-market channel strategies in the coming months, before presenting a unified partner program in 2018.
“With the announcement today, this concludes our comprehensive review of strategic alternatives by delivering a significant cash premium for our shareholders,” ShoreTel CEO Don Joos added.
“Customers are clearly moving to the cloud at a rapid pace. The combination of Mitel and ShoreTel creates a new UCaaS market leader with a differentiated strategy and solution, and a clear migration path so that no customer is left behind or will have to abandon what they already have to cloud-enable their organisation."
Once the transaction is complete, Joos said Mitel will be “uniquely positioned” to offer all customers the advantages of cloud-based communications.
For enterprise customers, ShoreTel's solutions aims to strengthen Mitel's ability to cloud-enable customers with existing premise or mixed estate deployments, creating a technical foundation for application deployment along the way.
With combined sales of US$1.3 billion, the acquisition also increases Mitel's total recurring revenue to 39 per cent of total revenue, more than doubling the vendor’s UCaaS revenue to US$263 million.
The acquisition comes almost a year to the day that Polycom dramatically pulled the plug on Mitel’s proposed US$1.9 billion acquisition of the company, scrapping the deal to go private instead.
Following a tense day of deliberating at the video conferencing vendor, over a years' worth of negotiating went off the table after the company accepted a rival US$2 billion bid from Siris Capital Group LLC, a private equity firm based in New York.
As reported by ARN, Polycom then officially ended the merger agreement, paying Mitel the $60 million termination fee after the vendor refused to raise its offer.
