Mitel to broaden global reach with Aastra Technologies acquisition

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Mark Brownlee
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Mitel Networks (TSX:MNW) is going to merge with Aastra Technologies (TSX:AAH) for $392 million in a cash and stock deal announced Monday morning that will expand the local firm’s global footprint.

Richard McBee is the president and CEO of Mitel. (Supplied photo)

The friendly acquisition will create a company with $1.1 billion in revenues accumulated over the past four quarters and the largest market share in Western Europe, the company said in a news release.

“The time is right,” said Richard McBee, president and CEO of Mitel, in a conference call with investors Monday morning.

“If we look at the various markets throughout the world and where they’re migrating and who’s going to be next and who’s going to go the fastest after the U.S. to the cloud, we think that this merger is really going to position us very well to take advantage of that.”

The company will remain headquartered in Ottawa and operate under the Mitel name. Aastra shareholders will own about 43 per cent of the company once the acquisition is completed.

The company will also look to reduce its operating costs by $45 million over the next two years by optimizing the supply chain, consolidating facilities and creating economies of scale.

Mr. McBee will remain in his role with the expanded company, as will chief financial officer Steve Spooner.

Aastra’s co-CEO’s will assume key executives with the new company. Francis Shen will become chief strategy officer, while Tony Shen takes over as chief operating officer.

Three board members Aastra appoints will become part of the company’s board, replacing two members of the Mitel board who will step down.

Mitel executives believe the deal will ideally position it to take advantage of what the company calls an $18-billion business communications market that is preparing to upgrade to software-based cloud services by expanding its geographic footprint.

"The business communications market is ripe for consolidation and on the cusp of a mass migration to cloud-based services. We believe that small competitors with narrow focus and limited global reach will quickly be marginalized," said Mr. McBee in a statement.

"Aastra's solid financial structure, complementary portfolios, geographic reach, and large installed-base immediately augment and expand Mitel's market footprint, enabling us to capitalize on a unique opportunity to leap-frog the competition and lead the market."

The company will look to take advantage of upgrade opportunities in Western Europe, Latin American markets like Brazil and Mexico and the Asia Pacific region. It also plans to “aggressively” expand in the enterprise cloud segment of the United States.

Mr. McBee said there is minimal overlap between the two companies’ international customer base.

“Aastra has some good platforms that will give us exposure to markets that we’re just not able to get to today and so we think that will accelerate our overall strategy,” he told investors.

The deal is the product of roughly two years of conversations, said Francis Shen of Aastra.

“We were able to see how the philosophies aligned – not only that we go after good and sexy business, but we do want to do it profitably and (with) good stability,” he said during the investor conference call.

Aastra shareholders are set to receive $31.96 per share, according to the Mitel news release.

Mitel is one of Canada's veteran technology companies, currently focused on unified communications technology for the business sector.

Aastra, based near Toronto in Concord, Ont., primarily makes communications equipment for the business sector.

–With a file from The Canadian Press.

Organizations: Aastra Technologies, Mitel, Mitel board Canadian Press

Geographic location: Western Europe, United States, Ottawa Brazil Mexico Canada Toronto Concord

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