Bankrupt Canadian network solutions company Nortel Networks Corp. (NRTLQ.PK) announced Monday that Ciena Corp. (CIEN) has acquired its Global Optical Networking And Carrier Ethernet Businesses for US$769 million in cash and debt.
Ciena's bid comprised US$530 million in cash plus US$239 million in aggregate principal amount of 6% senior convertible notes due 2017.
In a statement, president and chief executive officer, Gary Smith said, "These optical and carrier Ethernet assets bring exceptional technologies, talent and scale that will accelerate Ciena's current strategy to deliver innovative network solutions to customers worldwide. With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse with the scale to challenge the industry status quo and offer customers a practical path for transitioning to automated, optical Ethernet-based networking."
The transaction has already received U.S. and Canadian antitrust clearance, but is subject to court approvals in the U.S. and Canada which will be sought at a joint hearing on December 2, 2009. The transaction is anticipated to close in the first quarter of fiscal 2010, subject to approvals of courts in France and Israel as well as certain other regulatory approvals and closing conditions.
The transaction is expected to be significantly accretive to Ciena's results of operations in fiscal 2011. Further, Ciena has agreed to make employment offers to at least 2,000 Nortel employees to become part of Ciena's global team of network specialists, representing more than 85% of the employee base in the acquired businesses. This would also include those employees assigned in certain Europe, Middle East and Africa or EMEA jurisdictions, who will transfer automatically to Ciena by operation of law.
"Ciena provides a natural fit for Nortel's Optical and Carrier Ethernet assets, providing an environment where our businesses' expertise and technology can be grown and leveraged," president of Nortel's Metro Ethernet Networks, Philippe Morin added.
The proposed transaction would see Ciena purchase substantially all product platforms, patents and intellectual property. Toronto, Ontario-based Nortel would also provide for the transition of substantially all of its Optical Networking and Carrier Ethernet customer contracts to Ciena. The assets to be acquired generated about $1.36 billion in revenue for Nortel in 2008 and $556 million in the first 6 months of 2009.
In early October, Ciena had agreed to acquire the assets for $390 million in cash and 10 million shares of Ciena common stock which reflected a total consideration of about $521 million. The transaction was then subject to a competitive bidding process and required the approval of the U.S. Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice.
Earlier Monday, Nokia Siemens Networks said that it didn't submit the highest bid, along with private equity firm One Equity Partners, for the Nortel assets as it "believes that its final offer represented fair value for the assets, and further bidding could not be financially justified." Nokia Siemens Networks, a joint venture of Finland-based Nokia Corp. (NOK) and German engineering company Siemens AG (SI), was interested in buying large chunks of Nortel, including Nortel's carrier networks unit and wireless research unit.
Linthicum, Maryland-based network infrastructure solutions provider Ciena noted that the proposed combination will create a global leader in next-generation automated optical Ethernet networks and would also see the collective customer base rely on one of the largest and most innovative companies strategically focused on converged Ethernet networking. Ciena provides communications networking equipment, software, and services that support the transport, switching, aggregation, and management of voice, video, and data traffic.
Nortel, which is in a selling spree after its bankruptcy filing, earlier received approval from the U.S. and Canadian judges for the sale of Nortel's enterprise business to U.S.-based privately-held telecommunications company Avaya, Inc. for about $900 million. In late July, Nortel agreed to sell its CDMA business and LTE Access assets to Swedish telecom company TLM Ericsson Telephone Co. (ERIC) for $1.13 billion.
Nortel Networks and certain of its other Canadian subsidiaries filed for bankruptcy in mid-January for protection from creditors. Nortel is currently in the process of a comprehensive business and financial restructuring with the goal of emerging from the creditor protection process as a more focused and competitive company, including selling off parts of the company.
Nortel also continues to implement other aspects of its reorganization plan, including a round of layoffs announced in February. In addition to the previously announced 1,800 workforce reductions, Nortel stated in February its intention to slash global workforce by a further net 3,200 positions.
Both economic downturn and technology downturn have left Nortel grappling with a steep drop in demand for its voice-only wireless equipment, which is the company's bedrock. In August, the company reported a wider loss in its second quarter, being the seventh straight quarterly loss. Nortel was once considered as Canada's largest company with market value of over $250 billion in 2000 amid the telecom boom. Nortel saw its stock tumble after the technology bubble burst in 2000, and also on a series of accounting scandals and lawsuits.
In Monday's regular trading session, CIEN is currently trading at $12.40, down $0.77 or 5.85% on a volume of 2.66 million shares. In the past 52-week period, the stock has been trading in a broad range of $4.98 to $16.64.
NRTLQ.PK is currently trading at $0.052, up $0.002 or 3.79% on a volume of 52,300 shares. In the past 52-week period, the stock has been trading in a range of $0.01 to $0.64.
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