**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q3 2014.**
Earlier today, Canada-based Mitel said it proposed in early October, and again today, to pay $8.10 per share, in cash, or about $540 million, for the Silicon Valley-headquartered company. The figure amounted to a 24 percent premium over ShoreTel’s closing stock price on Friday, as well as a 30 percent premium over ShoreTel’s enterprise value, Mitel said.
Both firms make business IP phone systems and software. And both are moving more toward cloud-based platforms. All of this, on the surface, would appear to create a complementary organization.
But ShoreTel, without public explanation, has rejected the offer, which media are dubbing a “hostile takeover.”
Indeed, Mitel CEO Rich McBee expressed his displeasure this morning in a letter to ShoreTel’s board chairman, Charles Kissner.
“I was disappointed by your board’s rejection of our written proposal to acquire ShoreTel…and your refusal to engage with us,” McBee wrote. Having Mitel as an owner “would deliver immediate, certain value to ShoreTel’s stockholders, which we believe is far superior to what you can reasonably expect to achieve as a standalone company,” he added.
To that end, Mitel is keeping its offer open until 5 p.m. Eastern on Nov. 20.
“The business communications market is rapidly consolidating and Mitel has clearly stated that we intend to be a consolidator in this market,” McBee wrote. “We see a compelling opportunity to bring together two market innovators with strong and complementary market footprints, particularly in the U.S. where ShoreTel does more than 90 percent of its business.”
McBee further told Kissner that Mitel holds “a proven track record of successfully completing and integrating transactions.” That has been true for recent purchases such as prairieFyre Software and Aastra, but that was not the case in 2007 when, under different leadership, Mitel bought Arizona-based InterTel. That deal sparked a series of Wall Street issues and, according to reports, led to difficulties with post-merger integration.
Years later, and with Europe’s Aastra under its belt, Mitel now operates a $1-billion-per-year business. ShoreTel recently reported $314 million in fiscal 2014 revenue; it’s slated to release its latest earnings on Thursday. If Mitel prevails in its bid to buy ShoreTel, it’s not clear how the company would finance the takeover. At the end of June, Mitel held $134.2 million in cash and long-term debt of $336 million. ShoreTel, meantime, has $56.1 million in cash and little long-term debt.