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MARKETS LIVE BLOG:

STOCKS RISE, LED BY STELLAR ALPHABET, MICROSOFT EARNINGS

Results from 'Magnificent Seven' duo show cloud revenue boosted by strong AI demand

Mitel Networks to buy Aastra for C$392 million to expand in Europe

Reuters

By Narottam Medhora

(Reuters) - Mitel Networks Corp (NasdaqGM:MITL - News) (Toronto:MNW.TO - News), a provider of internet phone and video-conferencing services, said it would buy smaller rival Aastra Technologies Ltd (Toronto:AAH.TO - News) for C$392 million ($374 million) to expand in Europe.

Mitel's offer of $6.52 in cash plus 3.6 of its shares per Aastra share values Aastra at C$31.96 per share -- a premium of 13 percent to the stock's Friday close.

Aastra's shares were up 12 percent at C$31.75 in afternoon trade on Monday. They rose as much as 18 percent to C$33.32 earlier in the session.

The deal will double Mitel's revenue, giving the combined company revenue of about $1.1 billion, with 54 percent coming from Europe, Middle East and Africa, according to a presentation posted on Mitel's website.

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Mitel is also in talks with a UK-based telephone services provider and is looking to tie up with European carriers to provide cloud-based and telecommunication services, Chief Executive Richard McBee told Reuters.

He declined to provide any further details.

McBee said there is a tremendous opportunity to transition customers in Europe to cloud-based services from a virtual private network platforms.

"(The European) market place is significantly behind the North American market in terms of transition," he said.

Canadian business software maker Open Text Corp (Toronto:OTC.TO - News) (NasdaqGS:OTEX - News) said last week that it would buy a privately held cloud services company for $1.17 billion.

The deal with Aastra is expected to add to Mitel's earnings within the first year, Steve Spooner, Mitel's chief financial officer, said on the call.

Mitel said it would increase the number of directors on its board to nine from eight. Two members of its board will step down and Aastra will nominate three new members, it said.

Jefferies LLC is the financial adviser to Mitel, while TD Securities Inc is advising Aastra.

Osler, Hoskin and Harcourt LLP is Mitel's legal counsel, while Tetrault LLP is Aastra's counsel.

Mitel shares were up about 1 percent at $6.74 in afternoon trade on the Nasdaq. The stock was up under 1 percent at C$7.12 on the Toronto Stock Exchange.

($1 = 1.05 Canadian dollars)

(Reporting by Swetha Gopinath in Bangalore; Editing by Kirti Pandey and Savio D'Souza)