A shareholder application for a preliminary injunction in a U.S. court is the only barrier preventing Mitel Networks from gaining control of a competitor and doubling in size after Inter-Tel Inc. stockholders yesterday apparently approved being taken over by the Canadian telecommunications company.
In a news release Inter-Tel, headquartered in Tempe, Ariz., said a preliminary count showed more than 60 per cent of the votes cast favoured the US$723 million deal after former company founder and board member Steven Mihaylo withdrew a proposed recapitalization plan just days before the tally.
Mitel CEO Don Smith was quick to cheer the preliminary shareholder vote results.
“This acquisition gives us scale, gives us a broader customer community, gives us access to more applications and other platform directions,” he said in an interview.
The only legal impediment is an Aug. 8 shareholder application for a preliminary injunction to stop the deal with the Delaware Court of Chancery, where Inter-Tel is incorporated.
“I’m not a lawyer,” said Smith, “but it’s hard to imagine that where over 60 per cent of the shares have been voted in favour of the deal someone would overrule that vote. But we’ll see.”
If the court dismisses the application, Smith said it would take as little as a week for Mitel to take control of Inter-Tel.
Mihaylo owns 19 per cent of Intel-Tel and was fiercely opposed to Mitel’s bid of US$25.60 a share, proposed buying back the company for US$28 a share by using company cash and loans. Mitel refused to budget on its offer. Mihaylo was, however, able to stall the shareholder vote, which had been scheduled for June 29.
Then last month Inter-Tel forecast that sales this year will be below earlier projections, after which two independent proxy advisory services switched their advice and advised customers to vote for the merger.
The release of those figures appeared to have tipped the balance in favour of Mitel.
Company CEO Norman Stout said his firm did not meet the second quarter net sales used in the projections the company made its May proxy statement backing the Mitel merger, and that he expected sales to be well below projected net sales for 2007.
That made Inter-Tel’s future if it rejected the Mitel deal look shaky. Inter-Tel quoted one proxy advisory firm that changed its mind on the deal as saying the new figures were one of the reasons it changed its mind. In turn, a bitter Mihaylo was prompted to write shareholders on July 27 that he was “extremely confused and troubled” by the figures.
“I am amazed that less than two months ago the company published projections which indicated that its strategy would yield far more positive results,” he wrote.
“I feel whip-lashed and deceived.”
With no other choice but to use management’s figures, he withdrew his proposal to recapitalize the company, believing Inter-Tel could go it alone. However, he still urged shareholders to reject the Mitel bid.
Mitel makes IP-based PBX and phone systems for organizations ranging from small to enterprise. Inter-Tel is largely known for its endpoints and unified communications software for small and mid-sized businesses, but it also has a larger managed services offering than Mitel’s.
Together, smith said, they will make a company with about $850 million in annual revenue. Among the priorities when the companies are officially melded is to create a product migration path to assure customers and channel partners they won’t be stranded with out of date products.
“It’s not so much about new products,” Smith said of the merger potential. “It’s about acceleration as you combine the R and D of the solutions, it’s about more unified communications, more capability in the presence world, more collaboration.”