Avaya Closes Nortel Enterprise Acquisition

After months of opposition and $900 million, Nortel's enterprise assets are now finally in Avaya's hands.

By Sean Michael Kerner | Posted Dec 18, 2009
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Nearly six months after making its first public bid for Nortel's Enterprise assets, Avaya has now finally officially closed the deal.

Avaya's acquisition attempt for Nortel Enterprise faced multiple hurdles before it reached its conclusion. At various points, the deal encountered opposition from other bidders, from Nortel customers and even from the Canadian government.

Nortel has been under bankruptcy protection since the beginning of 2009 and has been selling off its assets ever since.

Avaya made an initial bid of $475 million to acquire Nortel Enterprise in July. Since Nortel is under bankruptcy protection, Avaya's offer was a "stalking horse" bid, which means that Avaya set the floor price for an auction under which other vendors could try and outbid the company.

The final auction for Nortel Enterprise occurred in September, with Avaya emerging the winner after upping its bid to $900 million.

Yet that didn't mean all was said and done. A number of parties opposed the Avaya/Nortel transaction, including U.S.-based service provider Verizon, which is also a big Nortel customer.

Verizon had been concerned that its existing Nortel support contracts would be at risk if the unit came under new ownership. Nortel and Avaya were able to successfully deflect the Verizon opposition after U.S. Bankruptcy Court Judge Kevin Gross issued an order authorizing and approving the sale.

Avaya's acquisition of Nortel Enterprise also faced scrutiny from the Canadian government -- a legal requirement under the Investment Canada Act (ICA), which ensures that the government can intervene in a sale of a Canadian-based company in the interest of national security.

As part of the acquisition, Avaya will be retaining approximately 6,000 Nortel Enterprise employees, including Joel Hackney, who previously served as president of Nortel Enterprise Solutions. Hackney will now hold the title of senior vice president at Avaya, while also holding the title of president of Avaya Government Solutions and Data.

Avaya has not yet provided specific details on how the Nortel Enterprise products will be integrated into its product portfolio. The company said in a statement today that it expects to provide information about the new combined product portfolio and roadmap within the next 30 days.

The completion of the Nortel Enterprise sale is the second major unit to be sold off by Nortel. In November, Nortel completed the sale of its wireless assets to Ericsson for $1.13 billion. Nortel's also in the process of selling its Metro Ethernet and Optical unit. Networking vendor Ciena won the auction for the Carrier Ethernet assets in late November with a bid of $769 million, though the deal still requires court and regulatory approvals.

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