UPDATED 13:34 EDT / DECEMBER 19 2016

APPS

Enterprise communications giant Mitel sells its telco business for $385M

Mitel Networks Corp. is looking to become a slimmer company in 2017.

The Canadian unified communications provider today announced that it has struck a deal to sell its carrier business to Xura Inc., a portfolio company of Siris Capital Group, for $385 million. This sum consists of $350 million in cash and a $35 million interest-free promissory note to be paid out at an unspecified date. Additionally, Mitel stands to gain a stake in a limited partnership that will be set up to manage the assets from the transaction.

The lineup consists of about a dozen software products designed to help network operators better support the growing amount of mobile traffic that is flowing through their networks. As part of the limited partnership arrangement, Siris will bring these offerings under the wing of Xura along with the employees from Mitel’s division. The result will be a new player in the telecommunication software market with a total headcount of about 2,000 workers.

Mitel, in turn, will use the cash from the deal to shore up its finances. Siris’ $385 million offer falls far short of the $560 million that the company paid in 2015 for Mavenir Systems Inc., which constitutes the core of its carrier business.

Mitel plans to replay a significant portion of its outstanding debt and implement a share buyback program in a bid to prop up its share price, which is currently down about 3 percent from its morning opening price. Longer-term, today’s deal will enable the company to focus more on its core communications business. Mitel is facing off against well-entrenched providers such as Cisco Systems Inc. and Microsoft Corp. that are working aggressively to expand their market share.

The company expects its deal with Siris to complete in the first quarter of 2017 pending the usual closing conditions.

Image via StockSnap

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