By Greg Roumeliotis
Aug 20 (Reuters) - Telecommunications equipment and softwarevendor Avaya Holdings Corp is considering an all-cashoffer from private equity firm Clayton Dubilier & Rice LLC(CD&R) as an alternative to a potential merger with MitelNetworks Corp, people familiar with the matter said on Tuesday.
Avaya has been in talks with Mitel, a privately-held peer,for months about a deal that would value it higher than whatprivate equity firms have offered, but would require Avayashareholders to accept stock in the combined company. The WallStreet Journal reported on Mitel's offer in April.
Now Avaya is seeking to negotiate a sale to CD&R that wouldallow all its shareholders to cash out and value it at asignificant premium to where its shares are trading, even thoughthe headline price would be lower than a deal with Mitel, thesources said.
Avaya's debt pile of $3.2 billion and its challengingbusiness outlook have made a leveraged buyout difficult for manyprivate equity firms. Seeking an edge, CD&R has been in talksabout partnering on its bid with RingCentral Inc, aprovider of enterprise cloud solutions, one of the sources said,cautioning that there is no certainty of such a deal.
It is still possible that Mitel prevails with its offer.Avaya will decide which transaction it wants to pursue in thecoming days, the sources said.
Avaya CEO James Chirico told investors on the company'slatest quarterly earnings call on Aug. 13 that he expected thesale process to conclude in the next 30 days. Reuters firstreported in March that the company was considering a sale.
Avaya and CD&R declined to comment, while Mitel andRingCentral did not immediately respond to requests for comment.
Based in Santa Clara, California, Avaya is one of theworld's largest providers of telephony systems. It was spun offfrom Lucent Technologies Inc in 2000, which used to be part ofAT&T Inc. It has a market capitalization of $1.4 billion.
Avaya, which competes with Microsoft Corp and CiscoSystems Inc, has been trying to boost its business ofproviding communications software to companies, as its hardwarebusiness became more commoditized and dated. It has also beenseeking to broaden its offerings of cloud-based communicationssolutions.
The deliberations come less than two yeas after Avayaemerged from bankruptcy protection, the legacy of a previousleveraged buyout, its $8.3 billion sale to private equity firmsTPG Capital and Silver Lake in 2007.
Mitel was acquired last year by private equity firmSearchlight Capital Partners LP for $2 billion.(Reporting by Greg Roumeliotis in New YorkAdditional reporting by Joshua Franklin in New YorkEditing by Nick Zieminski)