UPDATE 3-Mitel to buy Polycom for $1.96 bln following Elliott pressure

Fri Apr 15, 2016 5:05pm EDT
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* New company will have Mitel name, retain Polycom brand

* Mitel CEO Richard McBee to lead combined co

* Deal at a premium of 9.5 pct to Polycom's Thursday close

* Activist investor Elliott says supports Mitel-Polycom merger (Adds background on tax inversions, CEO comment)

By Liana B. Baker and Rishika S

April 15 (Reuters) - Canada's Mitel Networks Corp said on Friday it would buy U.S. voice and telephony gear maker Polycom Inc for about $1.96 billion in cash and stock, in a deal that had been championed by activist investor Elliott Management.

The merger will reduce Polycom's tax bill since the combined company will be domiciled in Canada, making it the first so-called tax "inversion" deal since the U.S. Treasury Department issued new rules earlier this month to curb such transactions.

President Barack Obama's proposed rules discourage tax "inversions", which are tax-driven deals in which a U.S. company merges with a foreign business and adopts its tax domicile to reduce the combined company's overall tax burden.

Upon closing, former shareholders of San Jose, California-based Polycom are expected to own close to 60 percent of the combined company, with Mitel shareholders owning the remainder. The company will have its headquarters in Ottawa and will operate under the Mitel name while retaining the Polycom brand.   Continued...