Sometimes combining two companies that compete in the same market provides a quick way to leapfrog your market share. That was likely the thinking behind Mitel’s decision to buy ShoreTel for $430 million.
Combining the two companies catapults Mitel to number two in the Unified Communications as a Service (UCaaS) market, according to the company.
As for ShoreTel, while it will get absorbed in the deal, it received a 28 percent premium over the closing stock price yesterday. The deal looks like this: Mitel will pay $7.50 a share for a total value of $430 million in an all-cash deal.
It’s worth noting, however, that Mitel attempted to buy ShoreTel in 2014 in an unsolicited offer for $8.10 a share and the ShoreTel board rejected the offer, saying that it significantly undervalued the company. That has obviously changed as ShoreTel peaked at around $10.32 a share in December 2015 before beginning a drop that bottomed out at $5.75 a share earlier this month. When Mitel came a-courtin’ this time, ShoreTel didn’t play hard to get. But it could have gotten more in 2014.
With the stroke of a pen, Mitel now has almost doubled its UCaaS revenue to $263 million, and there will be other efficiencies achieved by combining the two companies with similar markets.