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Avaya Wins Nortel Auction

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PostPosted: Mon Sep 14, 2009 11:15 am    Post subject: Avaya Wins Nortel Auction Reply with quote

Avaya Wins Nortel Auction
September 13, 2009

After making a pre-auction bid of $475 million, Avaya Inc., agreed to buy Nortel Networks Corp.ís enterprise-telecommunications unit, [which makes phone equipment and networks for companies], Government Solutions division and DiamondWare voice technology for $915 million. Avaya will pay $900 million in cash and $15 million for an employee retention program which allows them to retain 75% of Nortelís 1,800 remaining enterprise unit employees.

There were two bidders for the Nortel business; Avaya and Siemens Enterprise Communication and its private equity partner, Gores Group LLC.

The acquisition is expected to close late in the fourth quarter, even with Verzionís ongoing dispute with Avaya. Verizon said before the auction it intended to object if Avaya won because Avaya may terminate contracts Verizon considers essential to U.S. national security. The acquisition could catch the eye of antitrust regulators, who are in a state of high alert when it comes to deals in the telecommunications industry.

Avaya, a former public company which went private in 2007 through a takeover by private equity firms Silver Lake and TPG Inc., will surpass Cisco as the top provider of enterprise telecom equipment, with 27 percent marketshare compared to 21 percent for Cisco. Itís ironic that Nortel walked away from merger negotiations with Avaya in 2007.

Ericsson AB, the worldís largest maker of wireless networks, won an auction for Nortelís wireless unit in July, agreeing to pay $1.13 billion after six rounds of bidding and trumping an opening offer of $650 million from Nokia Siemens Networks.

Nortel's Metro Ethernet business is still waiting to be auctioned and potential bidders have been examining the operation preparing to make bids.
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