Mitel (Nasdaq:MITL) is acquiring ShoreTel (Nasdaq:SHOR) for $530 million, creating a $1.3 billion unified communications and cloud services business, the two companies confirmed today. Mitel expects the deal to be finalized in Q3 2017.
ShoreTel has been seeking a buyer since at least August 2016. Mitel and ShoreTel have considered merging multiple times over the years -- but the shift to cloud services apparently inspired the deal to get done this time around.
ShoreTel has been moving from an on-premises model to a cloud-centric unified communications model, which has triggered bumpy overall revenues -- though recurring revenues have been growing regularly.
Channel Commitment Continues
The combined company will have roughly 4,200 employees and 3,200 channel partners when the deal is finalized. But I don't know if that headcount figure includes any layoffs. Also, the channel figures could be a bit misleading since it's unclear how many traditional partners will ultimately succeed as cloud solutions providers.
Mitel CEO Rich McBee and Mitel CFO Steve Spooner will remain in those roles to lead the combined company, which will carry the Mitel name.
Financial highlights of the transaction, according to the companies, 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 $60 million in annual run rate spend expected to be achieved over two years.
- Expected to be accretive to non-GAAP EPS in the first year.
The figures are based on trailing 12 months combined to March 31, 2017. That $60 million in "synergy opportunity" is typically code for layoffs.
