The Motley Fool

Mitel-Aastra: A Merger for Offense and Defense

By Cameron Conway

Back on Nov. 11, Mitel Networks (TSX:MNW, NASDAQ:MITL) announced that it had reached a definitive agreement to purchase Ontario-based Aastra Technologies (TSX:AAH). This merger will create a billion-dollar company that will specialize in enterprise communications, cloud and premises-based unified communications solutions.

Mitel will acquire all of Aastra’s outstanding common shares at a price of US$6.52 in cash, plus 3.6 Mitel common shares for each Aastra common share. The total deal price: $392 million (CAD$31.96 per Aastra share). The company headquarters will remain in Ottawa under the name Mitel.

The deal is expected to be completed by the first quarter of 2014, although it must first get approval from shareholders on both sides, the TSX and NASDAQ. It’s also subject to the terms of the Investment Canada Act.

Benefits of the deal

The merger seems to make sense for both companies. While the tie-up gives more size and clout to the Mitel brand, globally though it will still lag just behind larger competitors such as Avaya and Cisco Systems.

Importantly, the Mitel-Aastra merger allows the new company to play offense in North America, where it’s currently third in market share, while playing defense in Western Europe — Mitel maintains a stronghold on that market, which would have been much more difficult to defend without the inclusion of Aastra.

The Mitel-Aastra deal is expected to open up a potential global customer base of 60 million end users. This merger will bring together Aastra’s global operations that include direct and indirect presence in more than 100 countries, together with Mitel’s strong presence in North America and the UK,

It will also connect Mitels $100 million a year Ottawa R&D facility to Aastra’s R&D facilities in France, Germany and Switzerland. The company hopes to reduce operating costs by $45 million over the next two years thanks to synchronization between the two entities.

Foolish bottom line

The merger announcement came only a week after Open Text revealed its plans to buy cloud-based business-to-business service provider GSX Group for $1.17 billion. Perhaps Open Text’s plans added a sense of urgency to the Mitel/Aastra merger. Certainly, it will force other communications support companies to make hard choices: get big and grow, or be left behind.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Cameron Conway does not own a position in any of the companies mentioned.  The Motley Fool does not own a position in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.