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Avaya's $900M Bid Wins Nortel Auction

Avaya lands Nortel's Enterprise business with a winning bid of $900 million, nearly double its original offer

September 14, 2009

2 Min Read
Avaya's $900M Bid Wins Nortel Auction

Avaya Inc. has prevailed in the weekend-long tussle for Nortel Networks Ltd. 's Enterprise division and will pay $900 million in cash to buy the business, almost double the initial $475 million offer it made in July. (See Avaya Offers $475M for Nortel's Enterprise.)

Should the deal be cleared by the relevant courts and regulatory bodies, Avaya will also pump $15 million into "an employee retention program," Nortel announced Monday morning.

The auction, which began Friday and continued through into Sunday, will see privately held Avaya take on "substantially all of the assets of Nortel’s global Enterprise Solutions business as well as the shares of Nortel Government Solutions Incorporated and DiamondWare, Ltd." Nortel hasn't said how many other bidders took part in the auction process, though Siemens Enterprise Communications GmbH & Co. KG is known to have been involved.

Approval from the U.S. and Canadian courts will be sought in a joint hearing to be held tomorrow, September 15. The deal then needs clearance from courts in France and Israel, as well as regulatory approval, and is subject to consultation with labor unions in some European markets. Nortel expects the sale to close late in the fourth quarter.

And it's always possible that third-party concerns will need to be dealt with before the sale can be completed: Verizon Communications Inc. (NYSE: VZ) has certainly had some concerns about Avaya's commitment to Nortel's current engagements. (See Avaya Responds to VZ Comments .)

Nortel and Avaya believe their combined operations, which will include Nortel's unified communications and enterprise voice and data assets, will be a particularly strong force in the government solutions sector. "Given the complementary strengths of the two companies in the U.S. Federal Government market, the combined operations are anticipated to yield a company best-suited to address the unique information technology requirements of the civil government and military," Nortel stated. (See Nortel Improves CS 1000 and Nortel Takes UC to the Masses.)

Nortel's Enterprise Solutions division generated revenues of $860 million during the first six months of 2009, compared with $1.25 billion during the same period in 2008. Enterprise voice systems specialist Avaya, which was taken private in an $8 billion-plus deal in October 2007, does not disclose its sales. (See Avaya Agrees to $8.2B Takeover.)

With Nortel's CDMA and LTE assets sold to Ericsson AB (Nasdaq: ERIC) and the Enterprise division all but taken care of, attention will now turn to the fate of Nortel's Metro Ethernet Networks (MEN) division and its carrier VOIP assets. (See Ciena: Ready to Pay for Nortel's MEN?, Report: Stalking Horse Stampedes Toward Nortel's VoIP Biz , and Handicapping the Nortel VoIP Triple Crown.)

— Ray Le Maistre, International News Editor, Light Reading

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