Less than two months after announcing it entered into a definitive merger agreement with Canadian telecommunications company Mitel Networks Corp., Polycom disclosed on Wednesday that it has received a competing acquisition offer from an unnamed private equity firm.
According to the terms of the new offer, the unnamed bidder (referenced as “Sponsor 1,” and which Bloomberg News sources identify as Siris Capital Group) is ready to pay $12.25 per share for Polycom. This puts the price for the company at about $1.66 billion, which would be funded with $650 million of equity financing and $950 million in debt financing.
How does Mitel's offer stack up against the new bid?
Under the Mitel deal announced in April, the company agreed to acquire the voice and video tech provider for $3.12 per share in cash and 1.31 Mitel common shares for each unit of Polycom common stock. The cash and stock transaction is valued at approximately $1.96 billion. However, based on Tuesday’s close, Mitel’s shares have fallen and the offer now values Polycom at $11.91 a share. When the deal was announced, Polycom was valued at $13.68 a share.
In an SEC filing, Polycom states, "The Polycom board, in consultation with its legal and financial advisors, will consider the outcome of its discussions or negotiations with Sponsor 1 to determine the course of action that is in the best interest of Polycom and its stockholders.” Officials are continuing negotiations with "Sponsor 1" to see if it is a superior proposal but remain firmly behind the Mitel deal.
In a statement, Mitel insists its offer gives more significant value to both Mitel and Polycom shareholders. “Mitel's acquisition of Polycom continues to be the best path forward and best strategic choice to create shareholder value, driven by attractive financial and operational scale.” In particular, it emphasized that Polycom shareholders will have more to gain as they are slated to own 60% "of a $2.4 billion, highly profitable, low leverage, strong cash flow company”.
What happens now?
The telecommunications industry is in a wait-and-see mode as to whether or not the ink will dry on the Mitel-Polycom merger agreement. Analysts say that if Polycom falls under "Sponsor 1", it will likely continue as an individual company albeit with some changes in its product and overall business strategy.
However, if Mitel ends up purchasing Polycom, the latter will certainly benefit from the former’s developed cloud services platform (given that cloud services is an area where Polycom lags behind). A merged Mitel and Polycom would create a company with $2.4 billion in annual revenue and 7,700 employees operating globally.