ShoreTel To Mitel: We'll 'Carefully Consider' Your Acquisition Offer

ShoreTel is considering an acquisition offer from unified communications rival Mitel, after Mitel's CEO urged the two companies to merge in an open letter to the ShoreTel board on Monday.

"At this time, ShoreTel’s board will carefully consider Mitel's proposal," a ShoreTel spokesperson told CRN in an email. "The board will consider this offer in the context of ShoreTel's strategic plan in order to determine the best way to enhance stockholder value."

Mitel's offer to buy ShoreTel, one of its chief rivals in the collaboration and unified communications space, is for $8.10 per share, or roughly $540 million. It's not the first time Mitel has made an offer for the company.

Related: ShoreTel Unveils Cloud Partner Program, Brings Sky Products To Channel

Mitel said its CEO Richard McBee first sent a letter to ShoreTel's board of directors on Oct. 2, proposing the acquisition. The board rejected the offer, prompting McBee to write a second letter to ShoreTel Chairman Charles Kissner on Monday, Mitel said.

"I was disappointed by your board's rejection of our written proposal to acquire ShoreTel Inc. for $8.10 per share in cash and your refusal to engage with us," McBee wrote in the letter, which was shared on Mitel's web site. "Our proposal, which represents a 24 percent premium to Friday's closing price and a 30 percent premium to ShoreTel's enterprise value, would deliver immediate, certain value to ShoreTel's stockholders, which we believe is far superior to what you can reasonably expect to achieve as a standalone company."

"We believe that a transaction between our two companies would be well received by your shareholders, and we are committed to providing them with an opportunity to express their views on our proposal," McBee continued.

Mitel said its offer to ShoreTel stands until 5 p.m. EST on Nov. 20.

Ontario-based Mitel said acquiring ShoreTel would allow it to broaden its geographic footprint, particularly in the U.S., where Sunnyvale, Calif.-based ShoreTel does about 90 percent of its business.

Some solution providers are hesitant about a ShoreTel-Mitel merger, given the overlap between the two vendors' portfolios and the potential tension it could spur between their partner bases.

"I think there could be some bumps in the road," said Herbert Rosen, president and CEO of Trans-West Network Solutions, a Phoenix-based solution provider and Mitel partner. "With the Mitel and Aastra merger [last year], there was very, very little overlap in terms of product and regional strengths. With ShoreTel, there is a direct overlap."

Joe Rittenhouse, president of business development at Converged Technology Partners, a Chicago-based ShoreTel partner, said he was glad to hear that ShoreTel originally rejected Mitel's offer, since ShoreTel already seems to be ahead of Mitel in cloud and other markets.

"An acquisition by a company that has shown to be behind the curve in R&D would not be a positive move as a ShoreTel reseller," Rittenhouse wrote in an email to CRN.

Rittenhouse noted the early success of ShoreTel Sky, the vendor's portfolio of cloud-based UC solutions.

"It's very early in the process," he said, "but everyone can see it's gaining momentum. It makes complete sense as to why Mitel would want to tap into that and expand it among their base of partners, as well."

According to its second quarter earnings released in August, Mitel has also been bullish on cloud and transitioning customers to the hosted UC model. The company said it installed 128,000 new cloud seats during the quarter -- 53,000 of which are recurring seats -- bringing its total cloud base to 754,000, an increase of 75 percent year-on-year.

Rosen, for his part, added that while a Mitel-ShoreTel merger would no doubt create some channel conflict early-on, it could be a good move for Mitel and its partners in the long run.

"It would take out one of the stronger competitors that Mitel has been facing over the years," Rosen said. "So long term, for Mitel dealers, I think it could be an incredibly strong move. I know, initially, I could have some more competition here, but so far Mitel's acquisitions have been good ones and they have always come out stronger."

Mitel in August reported a second quarter profit of $800,000, compared to $2.7 million in the year-ago quarter. It attributed the drop to the integration costs related to its Aastra acquisition.

ShoreTel in August reported a fourth quarter profit of $2.1 million, compared to a net loss of $2.3 million in the same quarter last year.

In a statement Monday, ShoreTel urged its shareholders "not to take any action" until Mitel's proposal is reviewed fully by its board.

PUBLISHED OCT. 20, 2014