(Bloomberg) -- Avaya Holdings Corp. is considering a bid from rival Mitel Networks that could create a telecommunications equipment vendor worth more than $5 billion including debt, people with knowledge of the matter said. The shares surged.

Closely held Mitel submitted an offer for Avaya that it believes would value the combined business at more than $20 per share, according to the people. The companies have held on-and-off discussions about a potential deal since April, the people said, asking not to be identified because the matter is private.

Under the terms being considered, Mitel’s investors would own roughly one-third of the combined business, which would remain publicly traded, one of the people said. Mitel, which is owned by private equity firm Searchlight Capital, expects synergies of at least $250 million a year from the deal, the people said.

Mitel is also proposing to inject about $150 million into the business, which would be used along with Avaya’s existing cash to fund share buybacks, according to one of the people. No final agreements have been reached, and Avaya could still consider rival offers, the people said.

Any deal for Avaya would come less than two years after the Santa Clara, California-based company emerged from bankruptcy. Avaya said Aug. 13 that the company was in advanced talks with multiple parties about a deal and would bring its strategic review to a conclusion within 30 days.

Representatives for Mitel and Avaya declined to comment. A representative for Searchlight couldn’t immediately be reached for comment.

Avaya shares rose 1.6% to $12.73 in New York at 1:46 p.m. after earlier jumping as much as 11%.

(Updates with share price in final paragraph.)

To contact the reporters on this story: Ed Hammond in New York at ehammond12@bloomberg.net;Liana Baker in New York at lbaker75@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, Ben Scent, Amy Thomson

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