Ciena bids $521m for Nortel's optical, Ethernet assets

Dylan Bushell-Embling
08 Oct 2009
00:00

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Nortel has accepted Ciena's $521 million stalking horse bid for the company's optical networking and carrier Ethernet businesses.

 

Ciena has offered $390 million in cash and 10 million shares of common stock, worth $131 million. for the units, Nortel said.

 

The assets include Nortel’s long-haul optical transport, metro optical Ethernet switching and transport and Ethernet transport, aggregation and switching products.

 

The offer has triggered a competitive bidding process, and also requires the approval of both US and Canadian bankruptcy courts as well as regulators from both countries.

 

Ciena CEO Gary Smith said he believed the deal will “position us for faster growth by giving us greater geographic reach, broader customer relationships and a deeper portfolio of solutions.”

 

But analysts have expressed concern at what they see as a steep asking price, with Standard and Poor's lowering its rating from “hold” to “sell.”

 

There are also concerns that the deal could bloat Ciena's operations. Ciena would incur integration costs of around $180 million from the acquisition, Smith said.

 

Ciena’s bid may also attract offers from much bigger rivals such as Cisco, Ericsson and Nokia Siemens.

 

The move would nearly double the company's workforce. Ciena, which currently has around 2,100 staff, has agreed to take on at least 2,000 Nortel employees.

 

But Smith said he expects the deal to become earnings accretive by fiscal 2011.

 

Source: 

telecomasia.net

Dylan Bushell-Embling

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