Try, Try Again: Mitel Increases Offer For ShoreTel To $574M
Mitel is again making a play to buy fellow unified communications (UC) vendor ShoreTel, saying Monday that it's willing to increase its bid to $574 million.
The move marks Mitel's third attempt to buy ShoreTel, one of its chief competitors in the UC market. Mitel first proposed the deal on Oct. 2, and then again on Oct. 20, in an open letter to the ShoreTel board of directors. The second offer was for $8.10 per share, or roughly $540 million.
The new proposal on Monday, which is $8.50 a share or about $574 million, also was offered in an open letter to the ShoreTel board from Mitel CEO Richard McBee.
McBee said in the letter he was disappointed that the ShoreTel board rejected Mitel's earlier proposals and by its "refusal to even discuss a potential transaction."
ShoreTel in October said its board would "carefully consider" Mitel's $540 million bid. A ShoreTel spokesperson on Monday, however, did not respond to CRN's request for comment by press time.
McBee argues that a Mitel-ShoreTel merger would accelerate both companies' efforts around cloud and hosted UC, and that the combined entity would create "far superior value" for ShoreTel shareholders than ShoreTel could ever achieve on its own.
McBee noted in his letter that Mitel and ShoreTel combined could become the "clear No. 1 global market share leader" in the cloud-based telephony market, with over 400,000 installed recurring cloud seats between the two companies.
Mitel and ShoreTel compete today in the cloud-based UC market against collaboration giants, including Cisco, Avaya and Microsoft.
"We continue to believe that the combination of our two companies offers a compelling opportunity to add sustained value to both organizations, and would solidify our combined leadership position in a highly competitive and rapidly consolidating market," McBee said in the letter.
NEXT: Partners Not Pleased With Proposed Merger
ShoreTel partners told CRN Monday that they wouldn't welcome a merger with Mitel.
"Mitel wouldn’t bring anything to our table," said Don Gulling, president of Verteks Consulting, an Ocala, Fla.-based ShoreTel partner. "I see us winning against [Mitel] in the marketplace all the time."
Gulling said he doesn't see a clear motivator for Mitel wanting to move forward with an acquisition other than wanting ShoreTel's cloud platform, called ShoreTel Sky, for its own. He also said Mitel's offer price is a "joke" and severely undervalues ShoreTel.
"Mitel has got a services-based PBX, Mitel has a cloud-based platform and contact center, and they've bought others, too," Gulling said. "So what are they getting with ShoreTel that they don’t already have? I just don't get it. It doesn’t make sense to me."
Randy Marcotte, CEO and head of sales at Perfect Video Conferencing, a Boulder City, Nev.-based ShoreTel partner, also said he would be disappointed to see a ShoreTel-Mitel deal go through.
"We've spent so much time and energy emphasizing the unique and special features of ShoreTel and its architecture and strategy, and competing with Mitel, that it seems to be a step backwards," Marcotte said in an email to CRN. "With ShoreTel Sky and the latest releases, and many of the virtualization options available for ShoreTel, it seems to me that Mitel needs ShoreTel more than ShoreTel would need Mitel."
Marcotte added that he is "certain" a deal would lead to channel conflict among the legacy ShoreTel and Mitel partner bases.
"It is already a crowded market, so to suddenly have two competing forces become bedfellows makes my head spin," Marcotte said. "I think it would be a mistake for ShoreTel."
Ottawa-based Mitel, which hasn't yet revealed its full 2014 earnings, reported a 2013 revenue of $576.9 million. Sunnyvale, Calif.-based ShoreTel, meanwhile, said in August that its 2014 revenue was $339.8 million.
McBee said Mitel's offer for ShoreTel stands until Nov. 20 at 5 p.m. ET.
PUBLISHED NOV. 10, 2014