Mitel Networks Corp. will acquire Aastra Technologies Ltd. in a stock and cash deal valued at about C$400 million, the two telecom equipment companies announced Monday.
If approved, the friendly deal will result in Aastra shareholders owning about 43 per cent of an enlarged Mitel, to be headquartered in Ottawa, and position the two companies to compete more effectively in a growing segment of the global IT equipment market.
The enlarged Mitel would have about US$1.1 billion of total revenue, with a global customer base and an opportunity to tap into demand for equipment that supports cloud computing.
“This merger will fundamentally change the landscape of our industry,” Mitel chief executive Richard McBee told analysts in a joint conference call Monday.
“The combined market opportunity we now address is over $18 billion that we can credibly go after. We are in a much better position to increase market share together.”
McBee said the merger will give the enlarged Mitel the top market share in Western Europe, a stronger hold on the No. 3 spot in North America and move it to the No. 5 spot in its industry worldwide.
“The companies are a perfect match when it comes to geographic diversity,” McBee said.
“Where Mitel is strong in North America, U.K. and the Netherlands, Aastra is strong in Europe, particularly Germany, France, Sweden and Switzerland.”
In addition, Mitel’s main focus is on the small- to mid-sized enterprise customers while Aastra’s is on larger organizations.
The two companies are also aiming to reduce combined operating costs by US$45 million over two years. It said they could consolidate facilities, optimizing supply chains and benefit from economies of scale.
However, the initial savings may come from reducing overlap in research and development while still spending about $100 million.
Under the deal, Aastra shareholders will receive US$6.52 per share cash plus 3.6 Mitel common shares. That initially gave the deal a value of about C$31.96 per Aastra share.
In U.S. currency, the stock portion of the Mitel offer was initially worth US$23.94 based on the Friday closing price of US$6.65 at Nasdaq, making its offer worth about US$30.46 when announced.
Mitel shares gained 26 cents or about four per cent to trade at C$7.35 on the Toronto Stock Exchange shortly after the market opened. Aastra shares gained $4.92 or 17.4 per cent to trade at C$33.15.