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Polycom Inc., a video conferencing service provider, has cancelled its merger with Mitel Networks Corp. to accept a $2 billion cash offer from Siris Capital Group.
Mitel announced in April its Polycom acquisition, with a $1.96 billion cash and stock deal. The transaction was expected to close in the third quarter.
Polycom, however, has decided to pay a $60 million termination fee and accept the Siris offer of more money paid in cash, which is a better deal for shareholders. Siris, which invests heavily in the telecommunications industry, expects to complete the transaction in the third quarter.
Mitel apparently determined beating the bid of New York-based Siris would cost more than the benefits of the acquisition, said Frost & Sullivan analyst Robert Arnold.
"Perhaps Mitel had calculated Polycom's value, as well as costs to integrate the assets, and had a hard number at which the deal would no longer make sense in terms of profitability," he said. "We may see Mitel make another merger-and-acquisition move in the video conferencing space."
Analysts expected Mitel to merge Polycom's audio and video conferencing services with its unified communications (UC) portfolio. Polycom would have operated as an independent subsidiary and gained access to Mitel's cloud-based UC platform.
Latest Polycom acquisition bid removes Microsoft problem
The new deal removes uncertainty for IT decision makers over the future of Polycom's partnership with Microsoft, which was in question with the Mitel bid due to the UC provider being a Microsoft competitor.
"As a standalone company, Polycom now reduces the risk of conflict in its strategically important relationship with Microsoft," Arnold said. "Partners will likely feel a sense of relief in these regards."
Polycom will also benefit from becoming a private company under Siris. "It can plan for longer-term growth, rather than have to focus on shorter-term efforts to bolster stock price," said Irwin Lazar, an analyst at Nemertes Research, based in Mokena, Ill.
Polycom could also receive additional capital from Siris to boost marketing and expansion efforts, especially in Europe, Lazar said.
Arnold said he expects Siris to streamline Polycom's operations and its product portfolio. "Polycom should gain greater stability and likely will be pushed in new or more concentrated directions than it has in the past," Arnold said.
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