On Thursday, ShoreTel shares increased a whopping 28%, as of 11:30 a.m. EDT. Why? It all started after Mitel Networks Corp. (NASDAQ:$MITL) disclosed that it would be acquiring the Sunnyvale, California-based company.
What Does That Mean?
For ShoreTel (NASDAQ:$SHOR), Mitel will be paying $7.50 per share in an all-cash deal, valuing its equity at roughly $530 million. This purchase price represents a 28% premium to Wednesday’s close, corresponding to Thursday’s gains. As of right now, ShoreTel shares are trading within pennies of the purchase price.
According to Mitel, this acquisition will help to accelerate its growth and roadmap progress into the Unified Communications-as-a-Service (UCaaS) market. When the two companies combine, they will transform into the number two player in the UCaaS market, and Rich McBee, who is the CEO of Mitel, will stay in command.
What Does the Future Hold?
Following the announcement of the deal, investors are now wondering: What does this mean for ShoreTel’s business and ShoreTel shares?
In a statement released to the public, CEO McBee said the following: “This is a very natural combination that enables us to continue to consolidate the industry and take advantage of cost synergy opportunities while adding new technologies and significant cloud growth to our business.”
The combined company is set to have roughly 3,200 channel partners and an advanced portfolio of communications and collaboration offerings.
Since August of 2016, ShoreTel has been looking into strategic alternatives, and this deal concludes that search. If all goes as planned, the deal is expected to be accretive to non-GAAP earnings per share in the first year. Additionally, cost synergies are forecast to be $60 million.
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