Enterprise firm Mitel to be acquired for $2B by Rackspace investor Searchlight

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Mitel, the enterprise communications company that tried but failed to buy Polycom for $2 billion, is now being acquired for $2 billion itself. The company today announced that it has agreed to be acquired by Searchlight Capital Partners in an all-cash transaction of $2 billion, a deal that will also see the company going private.

The price is a decent jump on the company’s market cap of $1.57 billion when it closed trading on Nasdaq yesterday evening, with the $11.15 per-share-deal a 24 percent premium over the average price on the stock’s 90-day average.

Mitel said its board of directors has voted in favor of the deal and “will recommend that Mitel shareholders approve the arrangement”, although it also includes a 45-day “go-shop” period, “which permits Mitel’s Board of Directors and advisors to actively solicit, evaluate and potentially enter into negotiations with parties that make alternative acquisition proposals through June 7, 2018.” So there could be yet more developments in store.

Mitel is a legacy player in the world of enterprise communications — it’s now 45 years old — and it is perhaps known best for its IP telephony solutions, competing with the likes of Avaya and Cisco. Mitel says it counts 70 million businesses in 100 countries as customers.

But developments in the enterprise communications market — which has shifted to include things like BYO, mobile-first solutions; apps in the cloud; and massively integrated IT/comms stacks where companies are simplifying all products in single platforms (and sometimes single vendors like Microsoft), or are using upstart (and less expensive) services like Slack for all interactions, voice and text — have all served to disrupt Mitel’s business. So more recently, Mitel has been on a longer-term mission to reposition itself as a cloud-based, integrated SaaS company. As part of those efforts, last year it also acquired ShoreTel in a $430 million deal.

The deal is being described as a way to make that shift more efficiently, away from the scrutiny it might otherwise have as a publicly-listed company.

“Mitel has succeeded for 45 years because of persistent innovation and relentless focus on delivering shareholder value,” said Terry Matthews, Mitel cofounder and chairman, in a statement. “Our Board determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our shareholders. It also affirms the tremendous value and market leadership of Mitel. We believe this transaction will provide Mitel with additional flexibility as a private company to pursue the company’s move-to-the-cloud strategy.”

Notably, among Searchlight’s investments is a strategic stake in Rackspace, another legacy company that was taken private in recent years. It will be interesting to see how and if Searchlight looks to explore synergies in these holdings, given Mitel’s cloud strategy and Rackspace’s focus on managed cloud services.

“This transaction is an exciting next step in our multi-year transformation that has enabled Mitel to emerge as an industry leader in the largest markets in the world,” added Mitel CEO Rich McBee. “As a private company, and with the strategic and capital support of the Searchlight funds, we will have greater flexibility to manage the transition in our market, accelerate our strategy, and drive the next phase of success for our customers, partners, and employees.”

Mitel was in tech news several years ago for filing a patent infringement case against Facebook covering technology for calling up web pages in text-based communications (which you get if you type in a URL in a message or post); and its Internet telephony services. Facebook retaliated with patent suits of its own, and the two eventually settled out of court in 2013. Interestingly, although Mitel appeared to be tapping into patents back then that were not actively used in its mainstay PBX business, its more recent shift to the cloud and more integrated communications services across devices might just make those relevant once again.

 

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