Mitel's $1.96 billion bid for Polycom is facing competition from a private equity company called Siris Capital Group, according to a report from Bloomberg, which cites sources familiar with the matter.
The Siris move could force Mitel Networks Corp. to table a more shareholder-friendly offer, using debt facilities to increase the amount of cash it pays to Polycom Inc. (Nasdaq: PLCM) shareholders, according to Paul Treiber, an RBC Capital Markets analyst quoted in the Bloomberg report.
While increasing Mitel's borrowings, this could also drive up earnings per share at a combined company, according to Treiber.
Should the deal collapse, Mitel is due to receive $60 million in breakup fees.
Mitel's share price closed up 7.2% on the Nasdaq yesterday after the news broke. But it has fallen by about 15% since April 14 -- the day before Mitel announced its deal with Polycom -- because first-quarter earnings missed analyst expectations.
The share price movements have lowered the value of Mitel's original offer, which comprised both cash and stock.
Mitel sells cloud-based unified communications systems to enterprises and service providers, while Polycom supplies IP and videoconferencing equipment to customers including Microsoft Corp. (Nasdaq: MSFT).
Mitel has pitched its potential takeover of Polycom as a way of creating a global leader in next-generation voice and video communications. (See Mitel to Buy Polycom for $1.96B and Mitel Courts Microsoft in PolyCom Bid.)
"The visions of the companies are almost identical," Mitel CEO Rich McBee told Light Reading during a recent conversation. "Seamless communications and collaboration for us. For them [Polycom], it's about making collaboration simple." (See What's Driving Mitel's $2B Polycom Acquisition?)
— Iain Morris, , News Editor, Light Reading