Enterprise Value ≈$430M
EV/LTM Revenue ≈1.21x
EV/LTM EBITDA ≈42.41x
Ottawa-based Mitel Networks (Nasdaq: MITL) and Sunnyvale-based ShoreTel (Nasdaq: SHOR) today announced that they have entered into a definitive merger agreement in which Mitel will acquire 100% of ShoreTel in an all-cash transaction at a price of $7.50 per share — a total equity value of ~$530M and a total enterprise value of ~$430M.
The purchase price represents a 28% premium to ShoreTel’s closing share price yesterday.
The deal is expected to be accretive to non-GAAP earnings per share in the first year and is expected to close in the third quarter of this year.
From Phone Lines to Online
A UCaaS Leader: Based on trailing twelve months to the the first quarter of this year, the company will have combined sales of $1.3B to make it the second largest Unified Communications as a Service (UCaaS) player in the market. The combined company, which will operate as Mitel, will have an annual revenue of $263M and have around 3,200 channel partners. Mitel’s second quarter earnings report, which was also released today, was also fairly positive; recurring cloud seats grew by 77,000 during the quarter to now stand at 665,000.
Long Journey: The deal is a result of Mitel’s long-standing efforts to acquire key telecommunications companies in its quest to lead in the rapidly expanding UCaaS market. In 2014, Mitel offered to buy ShoreTel for $540M in cash, which was rejected by ShoreTel’s board; the deal announced today is $110M less than the original offer. Meanwhile, in July 2016, telecommunications giant Polycom terminated an agreement in principle with Mitel when private equity firm Siris Capital Group stepped up with a $2B bid — ultimately acquiring Polycom in the same month and completing the transaction in September 2016.
Full Attention: Mitel’s commitment to UCaaS was made clear when it abandoned its foray into mobile — it divested its mobile division for $350M to digital communication company Xura Inc. in a deal that closed in March. (Xura was also taken private when it was acquired by Siris for $643M in August 2016). In addition to its mobile sell-off, in March, Mitel announced that it would merge the operations of its previously separate cloud-selling and enterprise-service divisions, resulting in more than 300 upcoming layoffs. Meanwhile, earlier this month Mitel announced that it had completed the acquisition of Toshiba’s UC business following the companies’ Memorandum of Understanding signed in May.
Cloud Focus: ShoreTel provides businesses services that optimize UC, business phone systems, and solutions for contact centers. Lately it has been moving more toward a cloud model, announcing it would begin offering SMS APIs through the Google Cloud Platform in June. Since August 2016, ShoreTel had been exploring strategic alternatives, and this deal concludes the search.
For more information about this transaction, click here to read the press release.
*Financial Information from S&P Capital IQ and the press release.
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