June 4, 2007 / 5:24 AM / 13 years ago

TPG among firms nearing deal for Avaya: source

NEW YORK (Reuters) - TPG Capital LLP is among the private equity firms nearing a deal to buy telecommunications equipment company Avaya Inc. AV.N, a source familiar with the matter said on Monday.

The sign at Avaya Inc. offices and lab in Westminster, Colorado is seen January 23, 2007. Private-equity firms TPG Capital LLP and Silver Lake Partners are in a leading position to buy telecommunications equipment company Avaya Inc. for about $17 per share, the Wall Street Journal reported in its online edition on Monday. REUTERS/Rick Wilking

Reports earlier on Monday said TPG and Silver Lake Partners are near a deal to buy Avaya for about $7.77 billion, or $17 a share, a 6 percent premium over Avaya’s Friday close of $16.08. That sent its shares up more than 4 percent to a two and a half year high on Monday. Deal speculation had already pushed the stock up 15 percent last week.

A deal could break down or Avaya could fall into the hands of another suitor, such as Canada’s Nortel Networks Corp. NT.TO, The Wall Street Journal reported, citing people familiar with the matter.

TPG, Silver Lake and Avaya declined comment.

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 intensified last week after Avaya postponed an investor conference.

“I think that $17 is a very good price for Avaya,” said Kaufman Brothers analyst Manuel Recarey, who believes that private equity investors are the most likely buyers.

“It does not fit into the type of acquisitions Cisco makes” Recarey said. “Nortel, I just don’t think they’ll have the financial wherewithal to do it.”

Avaya shares were up 59 cents, or 3.7 percent, to $16.67 on the New York Stock Exchange in afternoon trading after reaching

$16.80.

A deal would follow a spate of mergers in the telecommunications-equipment industry, with recent big deals 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, according to Recarey.

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