Ciena has entered into agreements with Nortel to purchase substantially all of the optical networking and carrier ethernet assets of Nortel’s Metro Ethernet Networks (MEN) business for $390m in cash and 10 million shares of Ciena common stock.
The product and technology assets to be acquired include Nortel’s long-haul optical transport portfolio; metro optical ethernet switching and transport offerings; ethernet transport, aggregation and switching technology; multiservice SONET/SDH product families; and network management software products.
The proposed transaction is expected to strengthen Ciena’s global presence and bring together complementary technologies in switching and transport that will offer customers a practical path for transitioning to automated, optical ethernet-based networking.
Based on the closing price of Ciena’s stock on Tuesday, October 6, 2009, the aggregate value of the shares to be issued by Ciena is approximately $131m, bringing the value of the consideration to approximately $521m.
Ciena is expected to make employment offers to at least 2,000 Nortel employees to become part of Ciena’s global team of network specialists. The proposed acquisition is expected to enhance Ciena’s existing Canadian-based development resources, making Ottawa the company’s largest product and development center.
Ciena currently has development facilities in Alpharetta, Georgia; Linthicum, Maryland; Ottawa, Ontario; San Jose, California; Spokane, Washington; and Gurgaon, India.
As a result of Nortel’s restructuring process, the transaction is subject to a competitive bidding process and requires the approval of the United States Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice. Ciena expects hearings before those courts to approve bidding procedures, break-up fee and expense reimbursement will be held within the next several weeks, followed by a bid period and a potential auction, with final sale hearings to be held thereafter.
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In the Europe, Middle East and Africa (EMEA) region, Ciena has entered into an agreement with the Joint Administrators, on behalf of the Nortel EMEA entities participating in the transaction for which they have been appointed, and where applicable, the transaction is subject to statutory information-sharing and consultation processes with the relevant employee representatives, and approval of the court in Israel.
The transaction is also subject to customary closing conditions, including receipt of necessary regulatory approvals. Deutsche Bank Securities and Foros Securities served as financial advisors to Ciena on this transaction.
