Avaya Holdings Corp. is weighing the possibility of a merger with Mitel Networks that would form a $5-billion telecoms empire, initial reports disclosed late Monday.
Mitel Networks laid down its offer with Avaya (NYSE: AVYA) that the company believes would give the merger over $20 a share, sources with knowledge of the matter said. Both parties have been in and out of talks regarding a potential partnership since April, sources who requested for anonymity, said.
The telco, headquartered at Santa Clara, California, filed for bankruptcy protection about 19 months ago after incurring $8.3 billion in leverage acquisition.
Under the agreements being considered, Mitel Networks' investors would acquire approximately 75 percent of the merged enterprises, which would keep their publicly-listed status, reports said. Mitel, based in Canada, and owned and operated by private equity corporation Searchlight Capital, projects total revenue of at around $250 million annually from the merger, sources bared.
Avaya chief executive officer Jim Chirico on Monday said as per the company's sales in the first six months this year that it was in advanced meetings with another company regarding an agreement, and would come up with a decision within a month.
Mitel is likewise offering to infuse around $150 million into the partnership, which would be tapped with Avaya's existing investments to fund stock buy-backs. No concrete deal has been made, and Avaya is still open to look at other proposals from competitors, based on reports.
According to Avaya spokesperson Alexandria Alias, there has been speculations from the press about Avaya's next moves and it was all just mere conjecture. "We don't comment on speculation or hearsay," Alias said in an interview with Business Journal, via email late on Monday.
Like its San Jose, CA-based competitor Cisco Systems, Avaya has been trying to transform its sales platform to concentrate on its existing software and subscriptions service instead of just sticking to its conventional hardware business. The company announced recently that it had hired the services of J.P. Morgan to study its strategic options, after Avaya received expressions of interest from other firms.
Company representatives for Avaya and Mitel Networks did not give any further details regarding the matter. A representative for Searchlight could not be immediately reached for comment.
Shares of Avaya were up 1.7 percent to $12.73 in Wall Street late Monday after the stock climbed as high as 12 percent earlier, following reports of the merger.
