Avaya, a global leader in solutions to enhance and simplify communications and collaboration, announced a strategic partnership with RingCentral, a leading provider of global enterprise cloud communications, collaboration and contact centre solutions. Through this exclusive partnership, Avaya will introduce Avaya Cloud Office by RingCentral (“Avaya Cloud Office” or “ACO”), a new global unified communications as a service (UCaaS) solution.

Avaya Cloud Office expands the company’s industry-leading portfolio to offer a full suite of UC, CC, UCaaS and CCaaS solutions to a global customer base, which includes more than 120,000 customers, over 100 million UC lines and 5 million CC users in over 180 countries.

“Avaya and RingCentral’s joint investment and commitment to bringing Avaya Cloud Office to market creates an unprecedented opportunity to accelerate the transition to the cloud with attractive economics for our customers and partners,” said Jim Chirico, President and CEO of Avaya. “This also gives us the opportunity to unlock value from a largely unmonetized base of our business as it brings compelling value to our customers and partners. We believe this highly complementary partnership is a game changer that expands the total addressable market for Avaya and creates meaningful value for both Avaya and RingCentral.”

ACO combines RingCentral’s leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly differentiated UCaaS offering. Avaya expects to launch ACO in the first quarter of calendar 2020.

“This strategic partnership leverages the respective strengths of Avaya and RingCentral to provide a definitive differentiated solution,” said Vlad Shmunis, Founder, Chairman and CEO of RingCentral. “We are excited to bring RingCentral’s leading UCaaS platform to Avaya’s installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both our companies.”

Chirico added, “The strategic actions that we are executing as a result of our comprehensive review create new growth opportunities, return capital to our shareholders and de-lever our balance sheet. With a clear path forward, we will further invest in technology and innovation to continue bringing state-of-the-art solutions to our valued customers and partners.”

Capital Allocation Priorities

Avaya’s Board of Directors has authorized a share repurchase program under which it may purchase up to $500 million of Avaya’s common stock. Avaya also announced plans to pay down $250 million of the principal debt under its Term Loan B.

Transaction Terms

RingCentral is contributing $500 million to its partnership with Avaya, including a $125 million investment of 3% redeemable preferred equity that is convertible at $16 per share, representing an approximate 6% position in Avaya on as-converted basis. RingCentral will also pay Avaya an advance of $375 million primarily in stock for future payments and certain licensing rights.

Timing and Approvals

The transaction is expected to close in the fourth quarter of calendar 2019, subject to customary closing conditions and regulatory approvals. The transaction does not require the approval of the shareholders of Avaya or RingCentral. The Boards of Directors of both companies have unanimously approved the transaction.

Advisors

J.P. Morgan is acting as exclusive financial advisor, and Kirkland & Ellis LLP is acting as legal advisor to Avaya.

About Avaya

Businesses are built on the experiences they provide, and every day millions of those experiences are built by Avaya (NYSE: AVYA). For over one hundred years, we’ve enabled organizations around the globe to win – by creating intelligent communications experiences for customers and employees. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration – in the cloud, on-premise or a hybrid of both. To grow your business, we’re committed to innovation, partnership, and a relentless focus on what’s next. We’re the technology company you trust to help you deliver Experiences that Matter. Visit us at www.avaya.com.