Videoconferencing giant Polycom Inc. shareholders finally gave the much-anticipated green signal to private equity firm, Siris Capital Group, LLC‘s proposal to acquire the former in a deal worth $2.0 billion in cash. Basically, Polycom chose Siris Capital over IP-based integrated communications solutions provider Mitel Networks Corp.'s bid for $1.96 billion to acquire Polycom this April.
Polycom expects this deal to help strengthen its base and stabilize its struggling voice network division. The acquisition is expected to complete by the end of either Sep or Oct 2016, subject to regulatory approvals and customary closing conditions.
Siris Capital’s Terms of the Deal
In July 2016, Polycom gave its approval for the $2 billion takeover bid by Siris Capital in a special meeting attended by its stockholders, rejecting Mitel’s previous offer.
Siris Capital offered a unilateral binding for all of the outstanding shares of Polycom where Polycom’s shares will be acquired for $12.50 per share. The $2 billion also includes Polycom’s outstanding debt and boasts a 13.6% premium to Mitel’s offer as per Polycom’s share price on Jul 7. The transaction will be financed by Siris Capital through a combination of equity and debt. Siris along with its co-investors will be financing the equity portion while Macquarie Capital will provide debt financing.
The deal is expected to help expand Siris Capital’s portfolio of investments in the telecommunication and technology space while Polycom is poised to benefit from the investments made by a leading industry player.
In Apr 2016, Mitel offered to acquire Polycom for $1.96 billion in cash and stock. Per the Mitel deal, Polycom's shareholders will receive $3.12 in cash and 1.31 Mitel shares for each Polycom share they own, or $13.68 based on Mitel’s closing share price on Apr 13, 2016. As a result, Polycom shareholders will own 60% of the combined entity. This deal would help Mitel gain traction over conferences and video collaborations. Mitel also had plans to merge its voice communications networking with Polycom’s portfolio if the deal worked out.
The economies of scale to be achieved from the merger were expected to help the enlarged company cope with larger peers like Cisco Systems Inc. (CSCO - Free Report) and Huawei Technologies Co. Ltd.
Notably, Polycom has an existing agreement with Microsoft Corp. (MSFT - Free Report) for supplying IP equipment to customers using Microsoft's Office 365 and Skype for Business products.
Polycom, known for its video and video conferencing solutions, has been grappling with certain economic issues. In order to tide over the adversities, the company opted to merge or get acquired. Mitel had come up with a takeover bid in Apr 2016 which was followed by a higher bid from Siris Capital in Jul 2016. Moreover, Mitel chose to retrace after Siris Capital’s entry.
Polycom currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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