Plantronics and Polycom announced that they have entered into a definitive agreement under which Plantronics will acquire Polycom in a cash and stock transaction valued at $2.0 billion enterprise value. The transaction has been unanimously approved by the boards of directors of both companies, is subject to regulatory approvals and other customary closing conditions, and is expected to close by the end of the third calendar quarter of 2018.
Compelling Strategic Rationale
With the acquisition of Polycom, Plantronics will become the partner of choice for the communications and collaboration ecosystem. The combination:
Accelerates Plantronics Strategy. Polycom brings a global leadership position in voice and video collaboration, accelerating Plantronics vision of delivering new communications and collaboration experiences.·
Broadens Portfolio. With the addition of Polycom, Plantronics will have the broadest portfolio of complementary products and services across the global communications and collaboration ecosystem, and the ability to create exceptional user experiences.·
Expands Market Opportunity. The combination positions Plantronics to capture additional opportunities across the $39.9B Unified Communications and Collaboration industry driven by innovation in video and the ubiquity of audio, building growth opportunities through data analytics and insight services.·
Augments Services Business. Polycom significantly expands Plantronics services offering, providing a meaningful presence in management and analytics services.
Today’s news will further accelerate Plantronics vision of an enterprise that is able to leverage powerful analytics, video and audio touchpoints to ignite all new communications and collaboration experiences. According to Joe Burton, President and Chief Executive Officer, Plantronics, “With the addition of Polycom’s solutions across video, audio and collaboration we will be able to deliver a comprehensive portfolio of communications and collaboration touch points and services to our customers and channel partners. This will put Plantronics in an ideal position to solve for today’s enterprise collaboration requirements while capitalizing on market opportunities associated with the evolving, intelligent enterprise.”
“Polycom has returned to growth by focusing on building strong ecosystem partnerships and delivering innovative, smart solutions for our customers and partners,” said Mary T. McDowell, Chief Executive Officer, Polycom. “Bringing Plantronics and Polycom together will broaden the breadth of solutions available to customers and partners and create a consistent end-user experience across many collaboration applications and devices. As one company, Plantronics and Polycom will make it even easier for all customers to solve big-business problems through human-to-human connections.”
“Siris recognizes the incredible opportunity in the Unified Communications industry and has been focused on building momentum in the industry for several years,” said Frank Baker, Founder and Managing Partner, Siris Capital. “We are excited about the long-term value that the combination of Plantronics and Polycom will create for customers, partners, stakeholders and employees.”
Polycom is a Leading Global provider of Communications and Collaboration Technologies Polycom is privately held and has been an innovator in personal collaboration, group collaboration, and services (including customer care, managed and professional services, and cloud services for interoperability, management, and analytics). For CY2017, Polycom had GAAP revenue of $1.1 billion, Non-GAAP gross margin of 56.6%, Non-GAAP operating income of $183.1 million and Non-GAAP operating margin of 16.0%. Significantly Enhances Plantronics Long-Term Shareholder Value
The transaction is expected to be immediately accretive to Non-GAAP EPS. Plantronics targets achieving annual run-rate cost synergies of $75 million within 12 months of transaction close.
Under terms of the definitive agreement, Plantronics will acquire Polycom for $2.0 billion enterprise value consisting of an estimated $690 million of net debt and an estimated $948 million in cash and 6.352 million Plantronics shares, valued at $362 million based on the 20 trading day average closing price of Plantronics stock prior to signing, resulting in Polycom shareholders owning approximately 16.0% of the combined company. Estimated amounts are subject to customary post-closing adjustments per the definitive agreement. Frank Baker, Founder and Managing Partner, Siris Capital, and Daniel Moloney, Executive Partner, Siris Capital, will join Plantronics Board of Directors.
Plantronics intends to fund the cash portion of the consideration with cash on hand and approximately $1.375 billion in new, fully-committed debt financing. Wells Fargo Bank and affiliates have committed to provide the debt financing for the transaction, subject to customary conditions. Plantronics expects to pay down a significant portion of the debt within the next several years with cash on the balance sheet and through cash generation.
Wells Fargo Securities is acting as lead financial advisor to Plantronics and Foley & Lardner LLP is serving as legal advisor. Morgan Stanley & Co. LLC is also serving as a financial advisor to Plantronics. Moelis & Company LLC and Macquarie Capital are acting as financial advisors to Polycom, along with Sidley Austin LLP who served as legal advisor.
Effective April 1, 2018 Robert Hagerty, board member and Chairman of the Strategy and Mergers and Acquisitions committees, will assume the role of Chairman and Marv Tseu will assume the role of Vice-Chairman of the Plantronics Board of Directors.
Plantronics announced that it is reaffirming its financial outlook previously announced in its third fiscal quarter 2018 earnings press release dated January 30, 2018.