Mitel (Nasdaq:MITL) (TSX:MNW) and ShoreTel (Nasdaq:SHOR) today
announced that they have entered into a definitive merger agreement
pursuant to which Mitel will acquire 100% of the outstanding shares
of ShoreTel common stock in an all-cash transaction at a price of
$7.50 per share, or a total equity value of approximately $530
million and a total enterprise value of approximately $430 million.
The purchase price represents a 28% premium to ShoreTel’s closing
share price on July 26, 2017.
Stronger together as a global market leader in the
rapidly growing UCaaS market
Continuing to deliver its move-to-the-cloud strategy, with this
transaction Mitel is accelerating on a growth path by investing
further and faster into the UCaaS (Unified Communications as a
Service) market as digital transformation accelerates customer
demand for cloud-based solutions globally. The combined company
will be the #2 player in the UCaaS market, creating a supplier with
the scale and technical capabilities to enable customers with new
cloud-based solutions and applications.
The combined company will be headquartered in Ottawa, Canada,
and will operate as Mitel. Rich McBee, Mitel’s Chief Executive
Officer, will lead the combined organization. Steve Spooner,
Mitel’s Chief Financial Officer, will also continue in that
role.
“This is a very natural combination that enables us to continue
to consolidate the industry and take advantage of cost synergy
opportunities while adding new technologies and significant cloud
growth to our business,” said Mitel CEO, Rich McBee. “Together,
Mitel and ShoreTel will be able to take customers to the cloud
faster with full-featured, cloud-based communications and
applications.”
Uniquely qualified to take customers and partners to the
cloud
Together, the combined company will have approximately 3,200
channel partners and an industry-leading portfolio of
communications and collaboration solutions. Mitel and ShoreTel are
committed to providing continued support and an attractive path
forward for all customers and partners – cloud and premise. On
closing of the proposed transaction, the combined company will have
a global workforce of approximately 4,200 employees.
“With the announcement today, this concludes our comprehensive
review of strategic alternatives by delivering a significant cash
premium for our shareholders,” said Don Joos, CEO of ShoreTel.
“Customers are clearly moving to the cloud at a rapid
pace. The combination of Mitel and ShoreTel creates a new
UCaaS market leader with a differentiated strategy and solution,
and a clear migration path so that no customer is left behind or
will have to abandon what they already have to cloud-enable their
organization.”
Once the transaction is complete, Mitel will be uniquely
positioned to offer all customers the advantages of cloud-based
communications. For enterprise customers, ShoreTel’s solutions will
strengthen Mitel’s ability to cloud-enable customers with existing
premise or mixed estate deployments, creating the technical
foundation needed for delivery of next-generation cloud
applications.
Size, scale and financial foundation to drive
growth
Financial highlights of the transaction include:
- Combined sales of $1.3 billion*
- Increases Mitel’s total recurring revenue to 39% of total
revenue*
- More than doubles Mitel’s UCaaS revenue to $263 million*
- Significant synergy opportunity targeted at $60M in annual run
rate spend expected to be achieved over two years
- Expected to be accretive to non-GAAP EPS in the first year
*based on trailing twelve months combined to March 31, 2017
Transaction Details
The transaction will be completed through a cash
tender offer for all of the outstanding shares of ShoreTel common
stock, followed by a merger, which will not require approval of
ShoreTel’s stockholders, in which remaining shares of ShoreTel
common stock will be converted into the right to receive the same
$7.50 cash per share price paid in the tender offer.
ShoreTel’s Board of Directors has recommended that ShoreTel
stockholders tender their shares in the offer. In connection
with the execution of the merger agreement, ShoreTel’s directors
and executive officers, have entered into tender support agreements
with Mitel pursuant to which they have agreed to tender their
shares to Mitel's offer.
Mitel intends to finance the consideration for
the acquisition and associated transaction expenses using a
combination of cash on hand from the combined business, drawings on
its existing revolving credit facility and proceeds from a new
fully underwritten $300 million term loan maturing in 2023.
The existing term loan and revolving credit facility will remain in
place, with the Company having already obtained the requisite
majority consent to certain amendments which accommodate the
acquisition and the incremental financing. BMO Capital Markets is
leading the new term loan facility with Citizens Bank, N.A., HSBC
Bank Canada and Canadian Imperial Bank of Commerce serving as Joint
Lead Arrangers and Joint Bookrunners. Citizens Bank, N.A.,
lead on the existing amended facilities, will act as administrative
agent for these and the new term loan. EA Markets LLC
provided Mitel with independent advisory and transaction services
in conjunction with the arrangement and structuring of the new
financing.
The transaction is expected to be completed in
the third quarter of 2017, subject to ShoreTel stockholders having
tendered shares representing more than 50% of the outstanding
shares of ShoreTel common stock, certain regulatory approvals
having been obtained and other customary conditions to the tender
offer having been satisfied.
Jefferies LLC is serving as financial advisor to
Mitel, Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving
as legal advisor to Mitel and Osler, Hoskin & Harcourt LLP is
serving as legal advisor to Mitel in connection with the financing.
J.P. Morgan Securities LLC is serving as financial advisor to
ShoreTel and Fenwick & West LLP is serving as legal advisor to
ShoreTel.
Conference Call Information
Mitel is hosting an investor conference call and live webcast
today, Thursday, July 27, 2017 at 8:30 a.m. ET (5:30 a.m. PT) to
discuss this announcement, as well as its financial results for the
second quarter ended June 30, 2017. To access the conference call,
dial 888-734-0328. Callers outside the U.S. and Canada should dial
678-894-3054. The live webcast will be accessible on Mitel's
investor relations website at www.mitel.com. It will be
archived and is expected to be available on this site for replay on
or about Friday, July 28, 2017 after 12:00 p.m. ET. We have
also provided a slide deck to supplement comments made specific to
this transaction as well as to help illustrate our financial
results. It has been posted on www.mitel.com. Our Form
10-Q is expected to be filed with the U.S. Securities and Exchange
Commission (the “SEC”) and Canadian securities regulatory
authorities on July 27, 2017 and will include our complete
financial results for the quarter ended June 30, 2017.
Important Information for Investors
The tender offer for the outstanding shares of ShoreTel common
stock referenced in this press release has not yet commenced. This
press release is for informational purposes only and is neither an
offer to purchase nor a solicitation of an offer to sell shares of
ShoreTel common stock, nor is it a substitute for the tender offer
materials that Mitel and its acquisition subsidiary will file with
the SEC upon commencement of the tender offer. At the time the
offer is commenced, Mitel and its acquisition subsidiary will file
tender offer materials on Schedule TO, and ShoreTel will thereafter
file a Solicitation/Recommendation Statement on Schedule 14D-9 with
the SEC with respect to the tender offer. The tender offer
materials (including an Offer to Purchase, a related Letter of
Transmittal and certain other offer documents) and the
Solicitation/Recommendation Statement will contain important
information. Holders of shares of ShoreTel common stock are urged
to read these documents when they become available because they
will contain important information that holders of ShoreTel common
stock should consider before making any decision regarding
tendering their shares. The Offer to Purchase, the related Letter
of Transmittal and certain other offer documents, as well as the
Solicitation/Recommendation Statement, will be made available to
all holders of shares of ShoreTel common stock at no expense to
them. The tender offer materials and the
Solicitation/Recommendation Statement will be made available for
free at the SEC’s web site at www.sec.gov. Copies of these
documents will also be made available free of charge on Mitel’s
website at investor.Mitel.com or by contacting Mitel’s Investor
Relations Department at 469-574-8134. Copies of the documents filed
with the SEC by ShoreTel will be available free of charge on
ShoreTel’s website at ir.ShoreTel.com or by contacting ShoreTel’s
Investor Relations Department at (408) 962-2573. In addition
to the Offer to Purchase, the related Letter of Transmittal and
certain other offer documents, as well as the
Solicitation/Recommendation Statement, Mitel and ShoreTel file
annual, quarterly and special reports and other information with
the SEC. You may read and copy any reports or other information
filed by Mitel or ShoreTel at the SEC public reference room at 100
F Street, N.E., Washington, D.C. 20549. Please call the Commission
at 1-800-SEC-0330 for further information on the public reference
room. Mitel’s and ShoreTel’s filings with the SEC are also
available to the public from commercial document-retrieval services
and at the website maintained by the SEC at www.sec.gov.
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding Mitel’s results as determined by generally accepted
accounting principles (GAAP), Mitel also discusses, in its press
releases and presentation materials, non-GAAP information which
Mitel’s management believes provides useful information to
investors, including Adjusted EBITDA, non-GAAP net income, non-GAAP
EPS (earnings per share) or non-GAAP net income per common share
and Constant Currency. Non-GAAP financial measures do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. We use these
non-GAAP financial measures to assist management and investors in
understanding our past financial performance and prospects for the
future, including changes in our operating results, trends and
marketplace performance, exclusive of unusual events and other
factors which do not directly affect what we consider to be our
core operating performance. Non-GAAP measures are among the primary
indicators management uses as a basis for our planning and
forecasting of future periods. Investors are cautioned that
non-GAAP financial measures should not be relied upon as a
substitute for financial measures prepared in accordance with U.S.
generally accepted accounting principles. Mitel provides a
reconciliation between GAAP and non-GAAP financial information in
our quarterly results announcements and in the supplemental slides
used in conjunction with Mitel’s quarterly calls. This information
is available on our website at www.mitel.com under the “Investor
Relations” section http://investor.mitel.com/events.cfm.
Forward Looking Statements
Some of the statements in this press release are forward-looking
statements (or forward-looking information) within the meaning of
applicable U.S. and Canadian securities laws. These include
statements using the words believe, target, outlook, may, will,
should, could, estimate, continue, expect, intend, plan, predict,
potential, project and anticipate, and similar statements which do
not describe the present or provide information about the past.
There is no guarantee that the expected events or expected results
will actually occur. Such statements reflect the current views of
management of Mitel and ShoreTel and are subject to a number of
risks and uncertainties. These statements are based on many
assumptions and factors, including general economic and market
conditions, industry conditions, operational and other factors. Any
changes in these assumptions or other factors could cause actual
results to differ materially from current expectations. All
forward-looking statements attributable to Mitel or ShoreTel, or
persons acting on either of their behalf, are expressly qualified
in their entirety by the cautionary statements set forth in this
paragraph. Undue reliance should not be placed on such statements.
In addition, material risks that could cause actual results to
differ from forward-looking statements include: the inherent
uncertainty associated with financial or other projections; the
integration of Mitel and ShoreTel and the ability to recognize the
anticipated benefits from the proposed acquisition of ShoreTel (the
“transaction”); the ability to obtain required regulatory approvals
for the transaction, the timing of obtaining such approvals and the
risk that such approvals may result in the imposition of conditions
that could adversely affect the expected benefits of the
transaction; the risk that the conditions to the transaction are
not satisfied on a timely basis or at all and the failure of the
transaction to close for any other reason; the anticipated size of
the markets and continued demand for Mitel and ShoreTel products
and services; the impact of competitive products and pricing and
disruption to Mitel’s and ShoreTel’s respective businesses that
could result from the announcement of the transaction; access to
available financing on a timely basis and on reasonable terms,
including amending Mitel’s existing credit facilities to fund the
cash portion of the consideration in connection with the
transaction; the ability to recognize the anticipated benefits from
the divestment of Mitel’s mobile division (“Mobile Division”);
risks associated with the non-cash consideration received by Mitel
in connection with the divestment of the Mobile Division; the
impact to Mitel’s business that could result from the announcement
of the divestment of the Mobile Division; Mitel’s ability to
achieve or sustain profitability in the future; fluctuations in
quarterly and annual revenues and operating results; fluctuations
in foreign exchange rates; current and ongoing global economic
instability, political unrest and related sanctions; intense
competition; reliance on channel partners for a significant
component of sales; dependence upon a small number of outside
contract manufacturers to manufacture products; and, Mitel’s
ability to successfully implement and achieve its business
strategies, including its growth of the company through
acquisitions and the integration of recently acquired businesses
and realization of synergies, including the proposed acquisition of
ShoreTel. Additional risks are described under the heading “Risk
Factors” in Mitel’s Annual Report on Form 10-K for the year ended
December 31, 2016 filed with the SEC and Canadian securities
regulatory authorities on March 1, 2017, in Mitel’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2017 to be filed
with the SEC and Canadian securities regulatory authorities, and in
ShoreTel’s Annual Report on Form 10-K for the year ended June 30,
2016 filed with the SEC on September 12, 2016. Forward-looking
statements speak only as of the date they are made. Except as
required by law, neither Mitel nor ShoreTel has any intention or
obligation to update or to publicly announce the results of any
revisions to any of the forward-looking statements to reflect
actual results, future events or developments, changes in
assumptions or changes in other factors affecting the
forward-looking statements.
About Mitel A global market leader in
enterprise communications powering more than two billion
business connections, Mitel (Nasdaq:MITL) (TSX:MNW) helps
businesses and service providers connect, collaborate and provide
innovative services to their customers. Our innovation and
communications experts serve more than 60 million business users in
more than 100 countries. For more information, go
to www.mitel.com and follow us on Twitter @Mitel.
Mitel is the registered trademark of Mitel Networks
Corporation.
All other trademarks are the property of their respective
owners.
MITL-F
About ShoreTel
ShoreTel (NASDAQ:SHOR) provides businesses worldwide with
communication solutions that make interactions simple. From
business phone systems, unified communications and contact center
solutions to a fully hosted voice and SMS development platform,
ShoreTel delivers unmatched flexibility and ease for companies
looking to increase productivity and drive innovation. ShoreTel
offers solutions in the cloud, onsite or a hybrid of both, giving
customers the freedom to choose the best fit for their business
needs now and in the future. Headquartered in Sunnyvale, Calif.,
ShoreTel has offices and partners worldwide. For more information,
visit shoretel.com.
Mitel Contact Information:
Media
Camille Beasley
469-212-0433
camille.beasley@mitel.com
Investors
Michael McCarthy
469-574-8134
michael.mccarthy@mitel.com
Industry Analysts
Denise Hogberg
469-212-0434
denise.hogberg@mitel.com
ShoreTel Contact Information:
Investors:
Barry Hutton
(408) 962-2573
bhutton@shoretel.com
Media
Katie Kregel
(512) 551-7065
kkregel@shoretel.com
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