After failing to complete its $1.96 billion merger with Polycom earlier this year when Polycom instead got acquired by Siris Capital for $2 billion, today Mitel Networks began the process of streamlining its business to go forth alone, or find another acquisition or merger as a simpler company.
Today Mitel announced that it would divest Mitel Mobility, its mobile operations, to Xura for $360 million in cash, plus a $35 million non-interest bearing promissory note and an equity interest in Sierra Private Investments L.P., the limited partnership that will own both Xura and the mobile division. Mitel plans now to focus its business more squarely on unified communications.
Coincidentally, Xura, like Polycom, was also acquired earlier this year by Siris for $649 million.
Alongside this deal, Xura also announced another acquisition: it’s also buying Ranzure, which develops 5G radio access network technology, for an undisclosed sum (we’re trying to find out the price and will update when and if we do).
The Ranzure deal is in part to acquire talent, and it points to a tangled thread through all of this. Pardeep Kohli, who founded Ranzure and was its CEO, will become the new CEO of Xura as part of the deal. Before Ranzure, Kohli was the CEO of Mavenir Systems, which was acquired by Mitel in 2015 for $560 million and became Mitel Mobility, which is what’s getting sold today along with Ranzure. It’s unclear what the value is of Mitel’s equity interest in Sierra, but taking just the cash portion of the deal on its own, this deal represents a significant hit to Mitel.
The divestment by Mitel and acquisitions by Xura speak to the ongoing trend of consolidation in the world of enterprise IT services.
Here, Xura is buying assets to build out a larger operation in virtualised network technologies for 5G networks and specifically their focus on Internet of Things applications. Alongside Ranzure’s 5G RAN technology, through Mitel it will pick up technology and IP in Voice-over-Long-Term Evolution (“VoLTE”), Voice-over-WiFi (“VoWiFi”), video, Rich Communication Services (“RCS”), messaging, radio access and packet core solutions.
“Xura has undergone a significant transformation over the past two years, and in the last several months has successfully transitioned to private ownership with the backing and support of Siris Capital, a financial sponsor with deep experience and operational expertise in telecommunications,” said Hubert de Pesquidoux, the executive chairman of Xura and future executive chairman of the combined company, in a statement.
“I would like to acknowledge [outgoing CEO] Philippe Tartavull for his significant contributions to the company during this transformational period. Today’s announcement marks a new and exciting chapter for Xura, and will accelerate and enhance the combined company’s ability to grow and deliver value to its customers, partners and employees,” he continued.
While the mobility part of Mitel’s business is moving to Xura, Mitel is going to focus more on unified communications, which was the part of the business that it had been hoping to align up with Polycom before that deal died.
“In a period of rapid change and massive technology transitions, scale and focus are key to driving growth and shareholder return. This transaction will allow Mitel to achieve these goals,” said Rich McBee, CEO of Mitel in a statement. “It also enables us to intensify our focus and capital in expanding our leadership position in the enterprise market as it prepares for large scale digital transformation of premise-based systems to the cloud.”
The deals are expected to close in Q1 2017.