NSN Might Rebid for Nortel's MEN

Didn't it seem as if that Metro Ethernet Networks (MEN) auction ended anticlimactically?

Worry no more. Nokia Networks wants to file a new bid for the Nortel Networks Ltd. unit: $810 million in cash, as Reuters reported earlier today.

It's a last-minute plea, considering the courts are due to finalize the sale to winning bidder Ciena Corp. (NYSE: CIEN) tomorrow. Ciena's offer consists of $530 million in cash and $239 million in convertible notes. (See Ciena Beats NSN to Buy Nortel's MEN.)

How is a new bid possible, considering the auction, you know, ENDED?

"What happens is: You go through the auction process, and then the auction result goes to the bankruptcy court for approval. The objection we filed asks the court to decline to approve the transaction with Ciena," NSN spokesman Barry French tells Light Reading.

As French explains it, NSN chose to stop bidding at the auction on November 22 because its all-cash offerings were up against Ciena's combination of cash and convertible notes -- and the true value of those notes was unclear.

"They took a decision in the auction to value these convertible notes at face value -- essentially the same as cash -- which we thought was pretty unusual," French says.

Like any debt, the convertible notes carry some risk to them, which arguably makes them worth less than their face value. Nortel creditor MatlinPatterson Global Advisors put up the same argument in filing its own objection to the Ciena win, as the Ottawa Citizen reported last week. (MatlinPatterson was the private equity firm that bid $725 million for Nortel's wireless assets.)

Ciena declined to comment on NSN's objection.

An even higher bid is likely to surprise some analysts. MEN has bled revenues after Nortel's filings for restructuring and bankruptcy, and Ciena has revealed that NSN was the only other bidder.

"I thought, when Ciena made the offer, it was already fully priced," said Andrew Schmitt, an analyst with Infonetics Research Inc. , in a recent discussion with Light Reading. In fact, Schmitt contends that Ciena's initial $521 million bid, when compared with MEN's revenues, was on par with the final bids for the wireless and enterprise assets. (See Nortel Wireless Winner: It's Ericsson! and Avaya's $900M Bid Wins Nortel Auction.) For that reason, Schmitt hadn't expected MEN's price to get run up much during auction.

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:51:50 PM
re: NSN Might Rebid for Nortel's MEN

All we need is a car-chase scene, and we've got the makings of a made-for-TV docudrama...

OK, maybe not.

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