The merger agreement entered into by collaboration and communication technology provider Polycom and Canadian telecommunications company Mitel Networks Corp. has been terminated after Polycom approved a higher offer from Siris Capital Group.
In a statement, Siris Capital Group announced that it will be acquiring all outstanding Polycom shares for $12.50 per share in cash. The all-cash transaction is valued at $2 billion, besting the $1.96 billion offer by Mitel. The deal is expected to close in the third quarter of 2016.
So what happened to the Polycom-Mitel deal?
In May, Polycom revealed that it has received a competing bid from an unnamed private equity firm. It was on July 7, 2016 that Polycom’s board of directors officially received and approved the competing bid, identifying the firm as Siris Capital Group.
“Polycom’s board of directors determined that Siris’ proposal constituted a “Company Superior Proposal” under its merger agreement with Mitel”, a statement read.
Polycom sent a notice to Mitel of a superior proposal. However, Mitel decided not to invoke its right to match the competing offer. And as a response, Polycom has indicated that it will end its merger pact with Mitel and subsequently pay the latter the termination fee of $60 million.
Mitel disappointed but remains positive
President and CEO of Mitel Richard McBee explained its decision on waiving its matching rights saying the company has exercised due diligence during the negotiation process and felt they have determined a fair value for Polycom. Adjusting the existing agreement and making a counter-offer, McBee said, wouldn’t be to the best interests of Mitel’s shareholders.
While shocked and disappointed that the merger (which has been in negotiations for ten months) will no longer materialize, McBee expressed that he remains “confident in Mitel's future as an industry leader and as a market consolidator.” He also wished Polycom ongoing success in the future.
What happens next
Industry watchers are at odds whether the latest development is for the best or not. Some say the failed acquisition deal with Mitel was unfortunate, while others expressed it was difficult to discern the benefits of the original deal in the first place. But after news broke of the termination of the deal, both Mitel’s and Polycom’s shares soared. Polycom surged nearly 13 percent (the highest since October), while Mitel spiked nearly 20 percent (the highest since January) on Friday.
The future of both companies are unclear yet; however, the industry could expect some changes in the coming months. McBee’s confidence in Mitel could hint at other brewing acquisitions. On the other hand, linking with Siris could open several opportunities for Polycom. Considering that Siris purchased Premiere Global Services Inc., a leading provider in collaboration software, last year, it could enable the merged company to offer a more holistic bundled hardware and software collaboration solution in the future.