Mitel will acquire 100% of the outstanding shares of ShoreTel common stock in an all-cash transaction at a price of $7.50 per share, or a total equity value of approximately $530 million and a total enterprise value of approximately $430 million. The purchase price represents a 28% premium to ShoreTel's closing share price on 26 July 2017.
"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," said Mitel CEO, Rich McBee. "Together, Mitel and ShoreTel will be able to take customers to the cloud faster with full-featured, cloud-based communications and applications."
As digital transformation accelerates customer demand for cloud-based solutions globally, the consolidation will accelerate Mitel's move to the high-growth Unified Communications-as-a-Service (UCaaS) market. A Mitel statement said: “The combined company will be the #2 player in the UCaaS market, creating a supplier with the scale and technical capabilities to enable customers with new cloud-based solutions and applications.”
Together, the combined company will have approximately 3,200 channel partners and an industry-leading portfolio of communications and collaboration solutions. Mitel and ShoreTel are committed to providing continued support and an attractive path forward for all customers and partners - cloud and premise. On closing of the proposed transaction, the combined company will have a global workforce of approximately 4,200 employees.
"This concludes our comprehensive review of strategic alternatives by delivering a significant cash premium for our shareholders," added Don Joos, CEO of ShoreTel.
"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."
The combined company will be headquartered in Ottawa, Canada, and will operate as Mitel. Rich McBee, Mitel's chief executive officer, will lead the combined organisation. Steve Spooner, Mitel's chief financial officer, will also continue in that role. As a result of the transaction, Mitel’s combined sales are $1.3 billion, Mitel’s total recurring revenue increases to 39% of total revenue, and it delivers attractive shareholder value with $60 million in expected synergies.
Once the transaction is complete, Mitel will be uniquely positioned to offer all customers the advantages of cloud-based communications. For enterprise customers, ShoreTel's solutions will strengthen Mitel's ability to cloud-enable customers with existing premise or mixed estate deployments, creating the technical foundation needed for delivery of next-generation cloud applications.
Mitel intends to finance the consideration for the acquisition and associated transaction expenses using a combination of cash on hand from the combined business, drawings on its existing revolving credit facility and proceeds from a new fully underwritten $300 million term loan maturing in 2023. The existing term loan and revolving credit facility will remain in place, with the company having already obtained the requisite majority consent to certain amendments which accommodate the acquisition and the incremental financing.
The transaction is expected to be completed in the third quarter of 2017, subject to ShoreTel stockholders having tendered shares representing more than 50% of the outstanding shares of ShoreTel common stock, certain regulatory approvals having been obtained and other customary conditions to the tender offer having been satisfied. GTB