March 25, 2010 11:35 pm

Polycom draws more private equity attention

The Gores Group, a Los Angeles-based private equity firm, has resumed its push for a merger between one of its portfolio companies and Polycom, the
video-conferencing specialist, people familiar with the situation said on Thursday.

The latest expression of interest by Gores follows an approach by London-based Apax Partners, which held talks with Polycom on a possible buy-out, which would have valued the company at more than $3bn.

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Gores initially approached Polycom last October about a deal with its 51 per cent-owned Siemens Enterprise Communications, but was rebuffed. Polycom and Siemens Enterprise subsequently agreed to a strategic alliance in January.

However, the Apax talks prompted Gores to return to Polycom. This week, it sent a letter to Robert Hagerty, Polycom’s chairman and chief executive, asking for a meeting to reopen talks about a merger with Siemens Enterprise.

Gores took its stake in Siemens Enterprise, a supplier of networking equipment, in October 2008, establishing a joint venture with Siemens of Germany.

Polycom shares, which have risen 40 per cent since the beginning of November, on Thursday fell about 1.28 per cent to $30.01. The company has a market value of about $2.5bn. The Gores Group declined to comment. Polycom declined to comment. Apax could not be reached for comment.

Apax and Polycom began talks in November 2009. However, the discussions foundered this month and Apax did not make an official offer.

Polycom, the largest maker of video-conferencing equipment, was left as the only sizeable independent provider in the market after Cisco last year agreed to buy Norwegian rival Tandberg for $3.4bn.

The pair are responsible for about 70 per cent of the equipment sold globally. Other companies, such as Hewlett-Packard, tend to focus on the higher-quality end of the video market.

Interest in Polycom reflects the competition in the market for so-called unified communications, encompassing voice calls, text and e-mail, video conferencing and instant messaging.

A merger would combine Polycom’s video conferencing expertise with Siemens Enterprise’s focus on communications equipment and convergence technology, said industry experts. That could help develop video technology for use in a desktop setting, or even on mobile devices.

There might also be potential to cut costs and reduce the combined company’s salesforce.

Microsoft, private equity-owned Avaya, Hewlett-Packard and IBM compete with Cisco in the unified-communications market.

Siemens Enterprise had revenues of $3.4bn in 2009. Polycom last year had sales of $967m.

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