By Michael Flaherty and Narrotam Medhora

(Reuters) - Video conferencing equipment maker Polycom Inc said it agreed to be bought by a private equity firm for about $1.7 billion, scrapping a three-month old deal with Canada's Mitel Networks Corp.

The private equity firm, Siris Capital Group, offered $12.50 a share in cash for Polycom, representing a premium of 15 percent to Polycom's close on Thursday.

The Siris Capital deal thwarts a plan by activist hedge fund Elliott Management, which bought stakes in both Polycom and Mitel and played a leading role in getting the two to agree to a merger.

San Jose, California-based Polycom will pay Mitel a termination fee of $60 million, the company said. Siris' offer will remain in effect until July 15, the private equity firm said in a statement.

Polycom's shares jumped about 12.9 percent to $12.27 in morning trading on Friday, while Mitel shares surged 18 percent.

New York-based Elliott bought stakes in Polycom and Canada's Mitel in October, saying at the time that the two companies should merge as part of a broader need for the sector to consolidate. In April, Mitel agreed to buy Polycom for around $1.98 billion in cash and stock.

As part of that deal, Polycom stockholders would get $3.12 in cash and 1.31 Mitel shares for each of their shares, or $13.68 based on the closing price of a Mitel common share on April 13. Shares of both companies dipped in the weeks following the agreement.

"This is a great outcome for all parties involved," Jesse Cohn, senior portfolio manager at Elliott, said in an emailed statement. Cohn congratulated Siris and praised top officials at both Polycom and Mitel for their role in the process. "We continue to see tremendous unrecognized value at Mitel."

Under terms of the original deal, the combined company was set to be based in Ottawa and run by Mitel executives.

Mitel said on Friday it would not raise its offer for Polycom and waived its right to match Siris' offer.

Siris Capital, which had previously made an offer of $12.25 per share for Polycom, said it would fund the deal through a combination of equity and debt.

Morgan Stanley was the financial adviser to Polycom, while Moelis & Co, Evercore Partners and Macquarie Capital were advisers to Siris Capital Group.

(Editing by Saumyadeb Chakrabarty and Frances Kerry)