Mitel Networks announces $2 billion cash and stock deal for Polycom

Canada based Mitel Networks Corporation has announced $2 billion deal to acquire telephony gear manufacturer Polycom for $1.96 billion in a stock and cash deal. The deal has been pushed by activist investor Elliot Management. The final entity will be domiciled in Canada and Polycom will enjoy tax savings.

San Jose, California-based Polycom Inc. will have its headquarters in Ottawa. The company will retain Polycom brand but will operate under Mitel Networks.

The U.S. Treasury Department has issued new rules to deal with inversions. Inversions are deals conducted by big companies to save taxes by shifting their headquarters outside the United States. United States has witnessed many inversion deals and President Obama has criticized the moves of companies operating large part of their business in the United States but shifting their headquarters to other countries for tax saving purposes.

Mitel Networks executives have shrugged off the concerns about the deal falling under inversion rules issued by the Treasury Department earlier this month.

Polycom shareholders will get $3.12 in cash for each share held. They will also receive 1.31 Mitel Networks share. The deal offers 9.5 percent premium on Polycom’s closing price.

Hedge fund Elliott Management has played an important role in the deal. Elliott Management owns 9.7 percent stake in Mitel Networks and 6.6 percent stake in Polycom.

The U.S. listed stock of Mitel Networks declined by 10 percent on Friday. Polycom stock closed two percent lower, after the deal was announced.

Wells Fargo analyst Jess Lubert said, “Polycom’s decision to be acquired by Mitel is a risk worth taking, as we think the challenges of remaining a standalone entity may be even greater for Polycom given the intensifying competitive backdrop.”

Announcing the deal, Mitel CEO Rich McBee said, “Mitel has a simple vision – to provide seamless communications and collaboration to customers. To bring that vision to life we are methodically putting the puzzle pieces in place to provide a seamless customer experience across any device and any environment.”

McBee further informed, “Polycom is one of the most respected brands in the world and is synonymous with the high quality and innovative conference and video capabilities that are now the norm of everyday collaboration. Together with industry-leading voice communications from Mitel, the combined company will have the talent and technology needed to truly deliver integrated solutions to businesses and service providers across enterprise, mobile and cloud environments.”

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