Mitel Signs Definitive Agreement to Divest Mobile Business

Xura, Inc. pays $350 million in cash

Mitel Signs Definitive Agreement to Divest Mobile Business
Mitel® (Nasdaq:MITL) (TSX:MNW), a global leader in real-time business, cloud and mobile communications, today announced that it has entered into a definitive agreement to divest its mobile division to the parent company of Xura, Inc. for $350 million in cash, a $35 million non-interest bearing promissory note and an equity interest in Sierra Private Investments L.P., the limited partnership that will own both Xura and the mobile division. The cash portion of the purchase price is subject to adjustments for closing working capital and indebtedness.

Today’s announcement reflects a strategic decision made during Mitel’s recent annual business review to refocus the company exclusively on the Unified Communications and Collaboration (UCC) market as digital transformation accelerates demand for cloud-based business communications solutions globally.

“In a period of rapid change and massive technology transitions, scale and focus are key to driving growth and shareholder return. This transaction will allow Mitel to achieve these goals,” said Rich McBee, CEO of Mitel. “It also enables us to intensify our focus and capital in expanding our leadership position in the enterprise market as it prepares for large scale digital transformation of premise-based systems to the cloud. Employees and customers of the mobile division will benefit by being part of a large carrier-focused company with the size, scale and support infrastructure needed to truly compete for and drive the next wave of 4G/5G innovation.”

With respect to shareholder value, Mr. McBee commented, “Simultaneous with our decision to monetize the mobile business, we initiated an evaluation of how to drive value for shareholders. Following the completion of the sale of the mobile division, Mitel will be significantly de-levered, more focused, and will have a number of meaningful options available to us to generate shareholder value. Further, we believe Mitel shares are substantially undervalued and, as a result, we intend to implement a share buyback program in conjunction with a full evaluation of our capital structure. We are working with our Board and financial advisors and will announce details in the near-term.”

Announces intent to implement share buyback program

  • Refocuses on UCC market as digital transformation accelerates premise to cloud transition
  • Reduces gross leverage from 3.3x to 1.8x on a proforma basis and improves cash flow to drive shareholder value
  • Strengthens Mitel’s financial foundation for future expansion in the enterprise market

The sale of the Mobile division is expected to close in the first quarter of 2017, subject to obtaining necessary regulatory approvals and other customary closing conditions. The transaction is not subject to any financing condition. The cash proceeds from the sale will be used to pay down Mitel’s existing credit facility, reducing the company’s gross leverage ratio from 3.3x to 1.8x, and net leverage to 1.3x on a proforma basis. As a result of the divestiture, Mitel expects to record a significant write-down of goodwill relating to the transaction in the fourth quarter of 2016.

Mitel’s Board of Directors has approved the sale of the Mobile division as well as, subject to regulatory approval, a share buyback program pursuant to a normal course issuer bid under Canadian securities laws and in compliance with safe harbours under applicable U.S. securities laws. Proceeds from the sale of the Mobile division will not be used to repurchase Mitel shares.


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