Courtesy of Benzinga.
Today, Elliott Management Corporation (“Elliott”) disclosed active stakes and accompanying 13-D filings in Polycom, Inc. (“Polycom”) (NASDAQ: PLCM) and Mitel Networks (“Mitel”) (NASDAQ: MITL) and sent the following letter to the Board of Directors of Polycom:
October 8, 2015
The Board of Directors
Polycom, Inc.
6001 America Center Drive
San Jose, CA 95002
Attn: Peter Leav, Chief Executive Officer and Director
Dear Members of the Board of Directors:
I am writing to you again on behalf of Elliott Associates, L.P. and Elliott International, L.P. (together, “Elliott” or “we”), which collectively own 6.6% of the outstanding common stock and equivalents of Polycom, Inc. (the “Company” or “Polycom”), making us one of your largest stockholders. In addition, we are today disclosing an active filing in Mitel Networks Corporation (“Mitel”), in which we are one of the largest stockholders and with whom we have a collaborative and productive dialogue. Our equity investments in both Polycom and Mitel are approximately the same size at around $100 million each. In addition, we also own stock in ShoreTel (“ShoreTel”). The investments are related.
The purpose of today’s letter is to outline our thoughts in the following sections:
1. Subscale Unified Communications and Collaboration (“UCC”) Vendors Face Meaningful Challenges: Polycom, Mitel and other UCC vendors have been challenged to maintain market share and will continue to face a very difficult market. Such conditions have led Polycom’s stock to meaningfully underperform all relevant metrics over all relevant timeframes.
2. Polycom Should Undertake a Full Strategic Review: Maintaining the status quo strategy will perpetuate Polycom’s track record of underperformance and risk further shareholder value erosion. In the last two years, Polycom has already responded by cutting costs, buying back stock and changing management; none of which has generated value to stockholders. Polycom must initiate a comprehensive review of all strategic options, and the time for that review is now.
3. An Industry Consolidation Strategy Should Be Evaluated and is Likely the Best Path Forward: Elliott strongly believes a combination of mid-tier UCC vendors will create greater scale, significant synergies and a meaningful valuation uplift for stockholders. Elliott would be willing to provide financing for Polycom’s acquisition of targets in the space, something we have successfully done before.
The letter details these items in the sections below. The majority of the letter is spent on Item 3, the “Consolidation Strategy,” which we believe to be the most attractive path forward for Polycom, with over 80% upside to the stock. We believe that Polycom is an excellent platform vehicle to roll up the UCC space: With significant cash flow, net cash and a capable management team and Board, Polycom can become an accretive M&A machine. Further, we believe the space is ripe for consolidation – small competitors with low valuations and duplicative cost structures create the opportunity.
Additionally, we have conveyed all of these thoughts to Mitel as well. We have owned Mitel for years, but acquired almost all of our new position this year based on the same thesis – that we believe Mitel is a good platform vehicle to roll up the sector and is also an attractive merger candidate for Polycom. Mitel has a very capable management team led by CEO Rich McBee and CFO Steve Spooner, has engaged in successful M&A and offers valuable tax benefits to a new combined company. We believe that the ideal Consolidation Strategy begins with a Polycom/Mitel combination, whether those companies stay public or go private.
We thank Peter and the Board for their consideration of our thoughts and look forward to our upcoming meeting.
Posted-In: News M&A Press Releases
