UPDATE 2-Canada's Mitel to buy Mavenir to expand into mobile services

Mon Mar 2, 2015 2:04pm EST
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(Adds quote from Mitel CEO)

By Sneha Banerjee and Liana B. Baker

March 2 (Reuters) - Canadian telecom services provider Mitel Networks Corp said on Monday it would buy U.S.-based Mavenir Systems Inc for $560 million in a bid to expand its telephone services to the high-speed 4G LTE mobile market.

Shares of Toronto-listed Mitel, which said the deal would "modestly" hurt profits in the second half of 2015, were down about 15 percent.

"Investors are absorbing it," Mitel's chief executive, Rich McBee, said in an interview. "A lot of our investors don't know who Mavenir is, but when they look underneath the covers they will realize this deal makes sense."

Stephens Inc analyst Barry McCarver said that "investors were hoping for an accretive deal in 2015, and this is not going to be accretive for about a year, year and a half."

Richardson, Texas-based Mavenir's stock jumped nearly 23 percent to $17.80, making it the third-biggest percentage gainer on the New York Stock Exchange.

McBee said Mitel first approached Mavenir in July about a tie-up.

The cash-and-stock deal comes a few months after Mitel's bid to buy U.S.-based ShoreTel Inc was scuttled.   Continued...