Northern Telecom has pulled out of its deal to buy 24.5% of beleaguered modem pioneer Hayes Microcomputer Products Inc, leaving Hayes with until April 22 to find an extra $17.5m in investment. Last month, the Georgia Bankruptcy Court approved Hayes’ Chapter 11 reorganization plan in preference to that proposed by Diamond Multimedia Systems Inc (CI 2870). The plan proposed that NorTel and ACMA Ltd should each buy 24.5% of Hayes, which, in conjunction with a $70m debt facility from CIT Group/Credit Finance, was to have taken Hayes out of bankruptcy protection. NorTel is giving nothing away about why it has changed its mind, and the get-out clause which it exploited also gives no clue: according to a source within Hayes, the original agreement had a February expiration date (which could not be met because the bankruptcy hearings were not completed) and it is this which NorTel used to escape the deal. Why NorTel waited until now to pull out, and what caused the rethink, are still unknown. Hayes still believes that it can find the investment it needs before the deadline. The company says it is in talks with six separate potential investors, the majority of which have already completed the due diligence process needed to invest in Hayes. Since the due diligence process is a lengthy one, it is really only these companies that can be seen as serious contenders, as the others would be unlikely to complete it in time, and would therefore require a dispensation by the court to delay the completion deadline. While Hayes is giving no hint as to who the potential investors are, the source did reveal that it is not any of the companies that have publicly expressed an interest in Hayes (US Robotics Inc, Diamond, and Boca Research Inc). The six companies are thought to have originally been in talks with Hayes before it signed the deal with NorTel and ACMA.
