It’s rare to see a deal panned as much as Inter-Tel Inc.’s pending $723 million acquisition by Mitel Networks Corp. was by Institutional Shareholder Services Inc. In a scathing report in which it recommends shareholders vote against the proposed deal of the telecommunications gearmaker, the proxy advisory firm criticized “the relatively low 7.6% one-day offer premium, the flawed sale process, lack of an imminent reason to sell the company without conducting a proper sale process and valuation.” Other than that, ISS really liked the acquisition.
While many institutional investors will cast their votes based on the ISS recommendation, the report in and of itself may not be enough to thwart the deal. If shareholders turn the offer down, there’s no indication that anyone else will step in and offer more for the company. Indeed, in May private equity firm Vector Capital expressed interest in offering $26.50 a share for Inter-Tel, or $748 million, but backed off after conducting due diligence. It's also unclear whether a recapitalization plan proposed by company founder Steven Mihaylo provides a better alternative for shareholders.
A best-case scenario for shareholders is if it appears as though results of the vote are in doubt, then Mitel may sweetens its offer to the $26 or $26.50 share range. Though Vector was unwilling to go that high, Mitel can wring out some synergies and still make the deal work at a higher price.
Full coverage will come later in The Daily Deal and on TheDeal.com.—David Shabelman
See June 14 story from TheDeal.com
See June 12 story from TheDeal.com
See April 27 story from TheDeal.com
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