Vector backs off from Inter-Tel as Mihaylo comes up with recapitalization plan

By Lisa Kerner

Charlotte, N.C., June 5 - Inter-Tel (Delaware), Inc. said Vector Capital Corp. withdrew its proposal to acquire the company for $26.60 per share in cash on news of founder and investor Steven G. Mihaylo's recapitalization plan for the company.

Mihaylo recommends the company use $200 million from its cash reserves, borrow an additional $200 million and begin a tender offer to purchase, after expenses and break-up fees, some 13.4 million Inter-Tel shares at $28.00 per share.

The plan is subject to confirmatory due diligence, financing and other conditions, a company news release stated. Inter-Tel's special committee will meet to consider the proposal in accordance with their fiduciary duties and the provisions of the Mitel Networks Corp. merger agreement.

However, Inter-Tel said there can be no assurance that a recapitalization or any other transaction will occur as a result of Mihaylo's proposal.

On April 26, Mitel agreed to acquire Inter-Tel Inc. for $25.60 per share in cash, or a total purchase price of $723 million.

Mihaylo has been critical of the company's direction in recent months, according to filings with the Securities and Exchange Commission.

On March 30, Mihaylo filed a preliminary proxy statement listing resolutions for the company's 2007 annual meeting that included the election of himself and four addition nominees to Inter-Tel's board. He is also recommending that the board be reduced to seven members from 11 members.

In addition, Mihaylo asked the company to consider hiring a financial adviser to study the feasibility of a Dutch auction tender offer to repurchase between $200 million and $250 million of common stock.

Inter-Tel is a Tempe, Ariz.-based provider of converged voice and data business communications.

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