Mitel Acquires Polycom: Pros And Cons

After MANY months of rumors, the news is finally in. Unified communications and telephony product/services vendor Mitel (MITL) has announced its intention to acquire collaboration, videoconferencing, and phone vendor Polycom (PLCM).

As was widely reported in the business press, the real discussions and due diligence began in October 2015 when Elliot Management (an investor in both companies) pushed for the two firms to combine.

The news is still hot off the presses. The paperwork was signed by Mitel yesterday morning, and by Polycom last night, and the press release went live at 6 AM EDT. The Wainhouse Research team was briefed only five minutes later ... yes, at 3:05 AM PT. While some of the details remain sketchy, here's what we know and think.

The deal is expected to close in Q3. The plan is that Polycom will retain its brand and its San Jose headquarters, and operate as an independent division within Mitel. Two Polycom board members will take positions on Mitel's board. Details about Polycom's executive staff have yet to be released. Once merged, the combined company will have a total workforce of about 7,700 employees and annual run rate of roughly $2.5 billion. Mitel expects the acquisition of Polycom to be accretive to its shareholders in 2017.

In terms of financials, Polycom stockholders will receive $3.12 in cash and $1.31 Mitel common shares for each share of Polycom common stock, yielding a combined value of $13.68 per Polycom share (a premium of about 22%) and a total deal value of roughly $1.96 billion in cash and stock. So Polycom shareholders need to have faith in Mitel's future, while Mitel's share price has already declined slightly since the announcement.

So now onto the real questions: What are the real benefits of this deal? Who makes money? What are the risks and concerns?

Read the rest of this article on No Jitter.