Nortel Saddles Up Stalking Horse to Sell Carrier VoIP and Application Solutions to Genband

Nortel has hoisted the well-worn saddle on another stalking horse bid to sell its remaining assets just before it stumbles off into the cold, icy, Canadian winter sunset.

 

The dying communications equipment manufacturer reports that it has agreed to sell its carrier VoIP and application solutions to Genband for $282 million, subject to balance sheet and other adjustments currently estimated at approximately $100 million. Genband, based in Plano, Texas, not far from Nortel’s (News - Alert) Richardson offices, makes IP gateways, session border controllers and fixed mobile convergence security solutions.

 

The tentative deal includes the planned sale of substantially all assets of the Nortel CVAS business globally including softswitching, gateways and SIP applications. These agreements also include all patents and intellectual property that are predominantly used in the CVAS enterprise.

 

In early January 2010, Nortel plans to seek U.S. and Canadian court approvals for bidding procedures, including a bid deadline and tentative auction date. And if several of the past auctions have been any indication, Genband should be prepared to pay substantially more, and risk being outbid. Avaya had won Nortel’s enterprise unit for $915 million, nearly double its stalking horse agreement for $475 million. Ericsson beat out Nokia (News - Alert) Siemens’s $650 million reach for Nortel’s CDMA and LTE assets but had to pay $1.13 billion.

 

Genband appears to be ready to go the distance. It has teamed with one of its existing shareholders, One Equity Partners III, L.P., to assist in financing the proposed purchase of Nortel’s CVAS assets. OEP manages investments and commitments for JP Morgan (News - Alert) Chase & Co. in private equity transactions.

 

Currently, subject to the terms of these agreements as well as any changes that may occur through the stalking horse and sale process, a significant majority of CVAS employees would have the opportunity to continue employment with Genband.  This includes the employees assigned to the CVAS business in certain EMEA (Europe Middle East Africa) jurisdictions who would transfer to Genband by operation of law.

 

The prize for the successful bidder, whether it is Genband or another firm, is quite rich. Nortel is reportedly a leading firm in the CVAS space, having shipped, it says, more than 118 million ports including over 10 million SIP lines to leading wireline and wireless carriers globally. In addition, it has secured business with 10 leading service providers since late 2008 and has gained more than 40 new Carrier VoIP customers since the beginning of 2009.

 

“The proposed transaction represents a clear and positive step forward for Nortel’s CVAS customers, employees, and business,” says Samih Elhage, president of Nortel’s CVAS business “Today’s announcement is a strong endorsement of our continued leadership in the carrier VoIP market where we have held the No. 1 position since 2002.

 

“Nortel’s industry-leadership in Carrier VoIP would not be possible without the continued commitment and support of our strong and loyal customer base of leading carriers across the globe. Throughout this process, Nortel will remain focused on providing our customers the highest level of service, support and responsiveness that they have come to expect from our team. Today’s news is also a testament to our employees, whose commitment to innovation and customer support has ensured our growth in market share in 2009 despite a challenging economy.”

 

“From a customer and partner standpoint, we believe our vision behind this acquisition is aligned with the industry’s desired evolution path to IP,” says Charles D. Vogt, CEO of Genband. “This transaction, although potentially subject to a competitive bidding process, represents an opportunity to fuel affordable network migration to cutting-edge VoIP technology. As a leader in next generation VoIP solutions today, our aim will be to empower service providers and their partners to access a range of leading VoIP solutions to interoperate with Nortel’s installed base, without having to replace existing infrastructure and investment.

“In addition to our complementary product portfolios and customer bases, we enjoy common locations such as Texas, India and China; and, should we succeed in the auction process, we will expand our operational footprint in Canada and North Carolina. We expect to make employment offers to a significant majority of Nortel CVAS employees.”