Avaya says in $8.2 bln deal with TPG, Silver Lake

NEW YORK (Reuters) - Avaya Inc. (AV.N) said on Monday it agreed to be acquired by private equity firms TPG Capital and Silver Lake for $8.2 billion, the latest in a string of deals in the telecommunications-equipment industry.

Avaya shareholders will receive $17.50 in cash per share, a premium of about 28 percent to its closing share price on May 25, when reports about a possible deal began to circulate.

Shares of Avaya closed up nearly 4 percent at $16.72 in New York Stock Exchange trade on Monday prior to the official announcement of the deal.

Avaya's small size compared with rivals like Cisco Systems Inc. (CSCO.O) has long made the company a subject of takeover speculation. Such talk recently intensified after Avaya postponed an investor conference.

The takeover follows a series of deals telecommunications-equipment industry, including the formation of Alcatel-Lucent and a venture between the network units of Nokia and Siemens AG.

Avaya, which generates about $5 billion in annual revenue, leads the market for office equipment for Web-based telephone calls despite its small size relative to rivals Nortel and Cisco, analysts said.

"After an extensive review of Avaya's strategic alternatives with Avaya management and our financial advisors, the board of directors of Avaya determined that this transaction with Silver Lake and TPG provides the best value for Avaya's shareholders," Avaya Non-Executive Chairman Phil Odeen said in a statement.

The transaction is expected to be completed in the fall of 2007, subject to approval by shareholders and regulators. Terms also allow Avaya to solicit proposals from third parties during the next 50 days.

Credit Suisse served as financial advisor to Avaya and its board, while Citi and Morgan Stanley acted as financial advisors to Silver Lake and TPG.

(Additional reporting by Sinead Carew, Michael Flaherty and Megan Davies)