This week news has been released which indicates that a private equity group has stepped in with a counter offer for Polycom which could see company decline the $1.96 billion offered by Mitel. The bid, apparently made by Siris Capital Group LLC (unconfirmed) but referred to as “Sponsor 1”, could be superior to Mitel’s bid.
Insiders close to the deal told Bloomberg News the offer from Siris Capital Group is more cash-based, as opposed to Mitel’s stock offering. However, the PE offer included a future earn-out if targets are hit. Given Polycoms eroding revenues this may seem less attractive to shareholders.
The choice is one which is likely to be made on factors which don’t just include money. If Polycom chooses to go with the New York private equity group the vendor could be driven down a very different path. Both routes will have pros and cons.
“They’re very different forks in the road,” said Ira Weinstein, an analyst at Wainhouse Research.
Under a private equity Group, Polycom will likely continue as an individual company, Weinstein said. Some of the changes the private equity group could make range from putting more money into products, changing the company’s business strategy or downsizing on the number of employees to increase revenue.
One benefit Mitel can offer Polycom is a developed cloud services platform, said Rob Arnold, an analyst with Frost & Sullivan. Cloud services are an area where Polycom has largely played catch-up, according to Arnold.
Polycom’s board of directors, in consultation with its legal and financial advisors, will consider the outcome of its discussions or negotiations with Siris to determine the course of action that is in the best interest of Polycom and its stockholders, it said in a statement.
In response, Mitel said in a statement, ‘Polycom shareholders specifically will own approximately 60% of a $2.4bn, highly profitable, low leverage, strong cash flow company with the scale and portfolio breadth to compete. The deal also offers certainty of committed financing in an uncertain and volatile debt market, and attractive synergy value. Mitel’s acquisition of Polycom continues to be the best path forward and best strategic choice to create shareholder value, driven by attractive financial and operational scale’.
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