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Mitel acquires American communications provider for almost $2 billion

Channel Strategy

Mitel has agreed to acquire American unified communications (UC) company Polycom for $1.96 billion.

The Wall Street Journal reports that the deal, which will see the latter’s brand preserved, was encouraged by activist investor Elliott Management Corp. to “spur consolidation in the telecom equipment industry.”

The new company will be based in Ottawa, ON where Mitel is currently headquartered. The new company will have a total of nearly 8,000 staff. Mitel’s current staff number 4,500.

The merger has been rumoured for several weeks and was originally valued at around $1 to 1.2 billion. Elliott Management reportedly had shares in both Polycom and Mitel, and wanted to see more consolidation among telecom and videoconferencing vendors, promising to help finance the acquisition.

There is speculation as to whether the move to Ottawa is more akin to a merger meant to lower corporate taxes for Polycom, yet Mitel chief executive Rich McBee told the Wall Street Journal that it is very much an acquisition that’s been in the works for years.

Nevertheless, it’s Polycom shareholders that will have majority stake in the new company, at 60 per cent of the shares.

The acquisition is seen as a move to better the position the companies in the networking and UC spaces, in which big players include Cisco and Avaya.

According to the Ottawa Citizen, Mitel has spent more than $1 billion to acquire several companies in recent years. Polycom will be Mitel’s sixth in four years.

The transaction is expected to close in the third quarter.