Mitel has swallowed up rival ShoreTel in a merger deal that, says the Canadian vendor, positions the enlarged business as the Number 2 player in the global UCaaS market. Mitel will acquire 100% of the outstanding shares of ShoreTel common stock in an all-cash transaction at a total equity value of approximately $530m and an enterprise value of around $430m.
The deal brings combined sales of $1.3bn and increases Mitel's total recurring revenue to 39% of total revenue and more than doubles Mitel's UCaaS revenue to $263m.
The combined company will have approximately 3,200 channel partners and a global workforce of circa 4,200 employees.
A synergy opportunity targeted at $60m in annual run rate spend is forecast to be achieved over two years.
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.
"This is a 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 McBee. "Together, Mitel and ShoreTel will be able to take customers to the cloud faster with full-featured, cloud-based communications and applications."
For enterprise customers, ShoreTel's solutions will strengthen Mitel's ability to cloud-enable customers with existing premise or mixed estate deployments.
The purchase price represents a 28% premium to ShoreTel's closing share price on July 26, 2017.
Don Joos, CEO of ShoreTel, said: This concludes our review of strategic alternatives by delivering a significant cash premium for our shareholders.
"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 transaction is expected to be completed in the third quarter of 2017.
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