Inter-Tel backs $723-million Mitel bid

14 June 2007

On the heels of Vector Capital Corp''s withdrawal from the bidding for voice and data solutions provider, Inter-Tel Inc, the telecommunications equipment maker has come out in favour of a $723-million offer from rival Mitel Networks Corp.

Both companies make voice and data networking equipment corporations use to switch from traditional phone networks to Internet telephony systems.

The preference for Mitel''s offer is over a leveraged recapitalisation proposal by shareholder and board member Steven Mihaylo who founded Inter-Tel and is a former CEO. Inter-Tel said in a statement that its former CEO''s proposal is unlikely to generate better shareholder value than being acquired by privately held Mitel.

Vector, which had joined forces with Mihaylo, said May 16 that it was working to put together an offer valued at $748 million, or $26.50 a share. But earlier this month abandoned plans to make a bid, saying it could not top Mihaylo''s recap offer.

Mihaylo had proposed to recapitalise Inter-Tel using $200 million of its existing cash and $200 million of new debt. Shareholders would receive cash for just 60 per cent of their shares, while the Mitel merger "is more certain and has a shorter path to payment for all Inter-Tel shares Inter-Tel said.

Mitel''s all-cash bid values Inter-Tel at $25.60 per share. Under the merger, expected to close in early July, Inter-Tel would take the Mitel name, but keep its product brand names and regional headquarters at Tempe, Arizona.