* Ciena to buy Nortel optical networking, ethernet ops
* To pay $769 million; 530 mln cash, $239 mln notes
* Rival Nokia Siemens Networks final bid came close
* NSN says further bidding was not financially justified
By Anupreeta Das and Tarmo Virki
NEW YORK/HELSINKI, Nov 23 Ciena Corp CIEN.O
will buy the optical networking and carrier ethernet business
of bankrupt Nortel for $769 million, after trumping Nokia
Siemens Networks in a three-day auction, sources told Reuters.
The deal will more than double turnover of U.S. network
equipment maker Ciena, raising market worries over integration
of operations, and over increase of its debt load.
Ciena's winning offer consists of $530 million in cash and
$239 million in convertible notes, one of the sources said,
speaking on condition of anonymity since details of the auction
have not been made public. [ID:nN22395163]
The final bid by rival Nokia Siemens Networks [NSN.UL],
which had teamed with private equity firm One Equity Partners,
came "very close" to Ciena's offer, the source said.
"Nokia Siemens Networks believes that its final offer
represented fair value for the assets, and further bidding
could not be financially justified," NSN said in a statement.
The deal values Nortel's unit at almost 0.8 times annual
sales, which gives "pretty good premium to the market", said
Earl Lum, president of EJL Wireless, a wireless infrastructure
Last month Ciena made a stalking-horse offer for these
assets of Nortel Networks Corp NRTLQ.PK, the Canada-based
telecommunications company that filed for bankruptcy in January
and has been auctioning off assets.
The stalking-horse bid set a floor price, but Nortel was
free to seek higher offers.
Ciena initially offered $390 million in cash and 10 million
shares of Ciena stock, for a total deal value of $522 million,
based on the Friday closing price of Ciena stock.
On Nov. 18, another source familiar with the sale told
Reuters that Nokia Siemens Networks [NSN.UL] and private equity
firm One Equity Partners, which manages $8 billion in
investments for JPMorgan (JPM.N), had also jointly bid for the
Representatives for Ciena and Nortel did not return calls
CIENA LIKES THE DEAL
For Ciena, the purchase of these core assets in Nortel's
metro ethernet networks business is an opportunity to increase
The equipment manufactured by these companies is used to
build the Internet infrastructure that supports corporate and
But analysts and investors have been concerned that the
deal will weigh down Ciena's operations, hurting the U.S.
company's shares in recent weeks.
To integrate the unit, Ciena would have to swallow the
business with annual revenues of around $1 billion -- higher
than the $902 million it earned in the same period.
Ciena had total cash and securities of just over $1 billion
and $798 million of debt on its balance sheet at end-July,
according to regulatory filings.
Winning the auction for these Nortel assets would have
helped Nokia Siemens, a 50-50 joint venture of Nokia NOK1V.HE
and Siemens AG (SIEGn.DE), expand its U.S. presence. The
company has said North America along with India, Japan and
China, are its four top growth targets.
(Editing by Gary Crosse and Lincoln Feast)