Exclusive: Mitel and Polycom in merger talks amid pressure from Elliott - sources

Tue Mar 15, 2016 8:38pm EDT
 
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By Michael Flaherty and Liana B. Baker

(Reuters) - Canada's Mitel Networks Corp MNW.TO is in talks to merge with U.S. peer Polycom Inc PLCM.O, in a deal that would combine the voice and telephony equipment providers and heed the demands of hedge fund Elliott Management, sources said on Tuesday.

Mitel, the smaller of the two companies with a $1.11 billion market value, made the initial approach to buy Polycom, according to sources familiar with the matter, but the talks remain fluid and the final structure is still being worked out.

Both companies declined to comment. The sources did not want to be identified because the deal discussions are private. As in any merger discussion, the talks could proceed to a deal or collapse at the last minute.

Activist investor Elliott Management Corp has been calling for the two companies to merge since October, when the $23 billion hedge fund disclosed a 6.6 percent stake in Polycom and a 9.6 percent stake in Mitel.

The deadline for Polycom shareholders to nominate directors to stand for election at its annual meeting expires on Wednesday. Polycom has a market worth of $1.43 billion.

Elliott, whose stake in Polycom was worth $111 million as of Dec. 31, declined to comment.

Elliott said in October that it had established a "collaborative dialogue with Mitel," and believed the company could pursue an all-stock merger with Polycom, which would save on taxes because Mitel is incorporated in Canada.

A Mitel attempt to buy Polycom could require a significant portion of Mitel stock, given the difference in market value.   Continued...