Nortel’s Corporate Networking Business Goes To … Avaya

Avaya has won the auction for Nortel’s Corporate Networking division, with a bid of some $915M.  That consists of $900M for the business and $15M for an employee retention plan.  Of course, Avaya had been the stalking horse bidder for this phase of the Nortel bankruptcy liquidation, but they had originally bid only $475M.  In other words, the bidding was apparently fierce and it could easily have not turned out this way.

Chief amongst other bidders was probably Siemens Enterprise Communications, and some thought they would emerge victorious.  The purchase would have given Siemens a much greater presence in North America, but alongside that would be the potential for fewer synergies.  Avaya on the other hand probably faces greater regulatory scrutiny to close the deal, however I don’t really think anyone expects them to actually hit any roadblocks.  

Last week Verizon (NYSE:VZ, news, filings) made some noise trying to slow down Avaya’s bid claiming that they serve US government contracts with Nortel gear and need assurances that the contract will not be dumped by Avaya in BK court.  But was this really a worry?  One way or another, Avaya isn’t likely to take its first step with Nortel’s unit under its wing by pissing off a customer of Verizon’s stature by turning down a government contract and thereby pissing off that customer two.  It will get worked out, regardless.

The deal is expected to close in the fourth quarter, which means the affected Nortel employees get to spend Christmas with an uncertain future.  Hopefully with an improving economy the need for further job cuts will be lessened.

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Categories: Mergers and Acquisitions · Telecom Equipment