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Mitel to acquire Polycom for $1.8bn

Spurred on by activist investor Elliott Management, Mitel Networks has agreed to acquire Polycom in a $1.8bn cash-and-stock deal

Mitel today announced that they have agreed to buy Polycom in $1.8bn cash-and-stock deal.

Under the terms of the agreement, Polycom stockholders will receive $3.12 in cash and 1.31 Mitel shares for each Polycom share, or $13.68 based on the closing price of a Mitel common share on Wednesday.

The transaction is the doing of activist investor and general agitator Elliott Management Group, which last year revealed a 6.6% stake in Polycom and a 9.6% stake in Mitel. The vulture fund has been pushing hard for two companies to strike a deal, stating that serious consolidation is needed in the telecoms, videoconferencing and UC markets.

“The combination of Mitel and Polycom makes perfect strategic and financial sense,” said Jesse Cohn, senior portfolio manager at Elliott. “The combined business will have far greater scale than either company alone, the ability to deliver a full array of products to customers, and the means to invest behind product areas that will provide stability and growth for the future.

The combined company will be headquartered in Ottawa, Canada, and will operate under the Mitel name, but the firms said in a statement, that they would maintain the Polycom brand. 

Richard McBee, Mitel's CEO will lead the combined organisation, and it is expected that Polycom’s directors will assume two seats on the Mitel board. The combined company will have a global workforce of approximately 7,700 employees.

"Mitel has a simple vision - to provide seamless communications and collaboration to customers. To bring that vision to life we are methodically putting the puzzle pieces in place to provide a seamless customer experience across any device and any environment," said McBee.

"Polycom is one of the most respected brands in the world and is synonymous with the high quality and innovative conference and video capabilities that are now the norm of everyday collaboration. Together with industry-leading voice communications from Mitel, the combined company will have the talent and technology needed to truly deliver integrated solutions to businesses and service providers across enterprise, mobile and cloud environments.”

The deal, which is expected to close in the third quarter of 2016, will generate an estimated $160m in cost savings. The combined firms will create a unified comms powerhouse, and will become the market leader in enterprise cloud communications, with its technology permeating 82% of the Fortune 500.

Peter Leav, President and CEO of Polycom, said: "Together, Polycom and Mitel expect to drive meaningful value for our shareholders, customers, partners and employees around the world.”

"We look forward to working closely with the Mitel team to ensure a smooth transition and continued innovation to bring the workplace of the future to our customers."

Shares of Polycom jumped 8.8% in premarket trade today, while shares of Mitel remained largely inactive at $7.88.

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