ShoreTel's Board of Directors has rejected Mitel's second buyout proposal. Will Mitel hike the offer more? Go for a hostile takeover when November 20 rolls around? And just how much does ShoreTel think it is worth, anyway?
According to ShoreTel's board, Mitel's second offer "significantly undervalues ShoreTel and its strong prospects for continued growth and value cration... and is not in the best interest of ShoreTel stockholders." Mitel has offered a total of $8.50 per share of ShoreTel common stock, made up of $8.10 in cash and another $0.40 per share in Mitel common stock in its second offer. The first offer was an all-cash transaction at $8.10 per share made on October 27, followed by the more recent $8.50 offer on November 10.
The ball is now in Mitel's court. Mitel already had two investor conferences scheduled for November 14 and November 19, so you can be sure that the company will be making a lot of noises to independent share holders and financial analysts about how good a united Mitel-ShoreTel would be.
ShoreTel's board called the second offer "highly inadequate," but hasn't floated any numbers on what exactly would be an adequate value. Nor is there any indication of ShoreTel and Mitel executives getting into a conference room and discussing a definition of "adequate value," but I suspect financial advisors (banks, investment firms, lawyers) from both sides might be going into a room somewhere to play a little liar's poker and determine if the two companies can get close enough to make a deal.
Mitel's first decision is how much it will offer to sweeten the pot between now and the November 20 expiration date for the takeover bid. As I write this, it is late on Friday afternoon, November 14, so you figure that Mitel executives might make another "final-final" offer on Monday morning, November 17. On a blind guess, I'd bet Mitel might go from $0.40 in common stock up to a range of $0.80 to $1. ShoreTel shareholders get a bunch of cash and some future upside in Mitel stock.
A November 17 offer would give the ShoreTel board of directors time to look at the offer and go through the motions of another vote on a takeover, issuing a response by Wednesday, November 19.
If ShoreTel rejects a revised final offer outright, Mitel should by now have sufficient indicators from independent shareholders to wage a hostile takeover or give up. ShoreTel stock is bouncing around between $8.05 and $8.35 over the week of November 10, so nobody is betting on the company to get a crazy higher offer out of Mitel.
ShoreTel's current mindset may be based on how much it paid for M5 Networks. Shareholders of M5 got a big chunk of cash and considerable stock, so ShoreTel's board is probably looking for more Mitel stock and some seats on Mitel's board. Exactly how much ShoreTel is looking for is unknown, but will no doubt leak out sometime in the future, if a merger deal is under discussion.
I suspect ShoreTel wants $2 or more in Mitel stock in addition to the $8.10 share in cash, but I can't see Mitel going that high based upon its current and revised bids.
We'll know more next week. I am predicting Mitel will sweeten the pot a bit more, because ShoreTel's board will have to either accept it or defend turning down a final offer to its institutional shareholders. After ShoreTel rejects the final offer because it isn't high enough, Mitel will launch a hostile takeover bid if it thinks it has enough support from shareholders.
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