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Mitel Networks, a provider of cloud and premises-based unified communications software solutions, and enterprise communication company Aastra Technologies have entered into a definitive arrangement agreement unanimously approved by the boards of both companies, under which Mitel will acquire all of the outstanding Aastra common shares for $6.52 in cash plus 3,6 Mitel common shares per each Aastra common share.

Using the Mitel closing common share price on 8 November 2013, and a CAD/USD exchange rate of 0.9531, this amounts to CAD$31.96 per Aastra common share, a total value on closing to Aastra shareholders of CAD$392-million and represents a 20,9% premium to the 30-day volume weighted average price (VWAP) of Aastra common shares as of 8 November 2013.

The strategic move, designed to build scope and scale in a consolidating market, will create a billion dollar company with one of the largest global footprints in the industry, number one market share in Western Europe, a $100-million cloud business and a global installed customer base ready for upgrade as the $18-billion business communications market prepares to migrate to software-based cloud services.

The combined company will be headquartered in Ottawa, Canada and will operate under the name Mitel while continuing to leverage Aastra’s strong brand recognition in select European markets. The executive management team will continue to be led by current Mitel president and CEO Richard McBee.

“The business communications market is ripe for consolidation and on the cusp of a mass migration to cloud-based services. We believe that small competitors with narrow focus and limited global reach will quickly be marginalised,” says McBee.

“Aastra’s solid financial structure, complementary portfolios, geographic reach, and large installed-base immediately augment and expand Mitel’s market footprint, enabling us to capitalise on a unique opportunity to leap-frog the competition and lead the market,” he adds.

Reporting to McBee will be chief financial officer Steve Spooner and Aastra’s co-CEOs, Francis Shen, who will assume the position of chief strategy officer and Tony Shen, who will assume the position of chief operating officer.

Mitel will increase the number of directors on its board from eight to nine. Two existing members of the Mitel board will step down and Aastra will have the right to appoint three new board nominees to fill the vacancies.

“Our two organisations are tightly aligned culturally and financially with little product, geographic or channel overlap,” says Tony Shen.

“We are stronger together and combined we will be a major global player. We are confident that this merger will create value for our shareholders, customers, partners and employees,” adds Francis Shen.

The combination of Mitel and Aastra will enable the companies to significantly expand their organisational scale and scope with a combined market presence of over 60-million end users in more than 100 countries and a global network of more than 2 500 channel partners, positioning the new company to immediately capitalise on several key strategic growth opportunities.

The combined company will provide channel partners and customers access to a broad portfolio that supports businesses of any size, from SMB to enterprise.

With minimal channel overlap between the two organisations, the combination significantly expands the addressable market opportunities of existing partners, equipping them to sell into the small and mid-size business market in local or regional geographic opportunities as well as large and lucrative global enterprise accounts.

Nearly doubling the stand-alone revenue of either company, the combination results in combined revenue for the new company of approximately $1,1-billion for the trailing four quarters. The deal will create the financial scale and operational leverage to drive shareholder value.