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Canada’s Nortel Networks to sell optical networking and carrier ethernet businesses to Ciena

By Germaine Lombardo for CEOWORLD Magazine Updated:October 7, 2009

Canada’s Nortel Networks (NRTLQ.PK) said on Wednesday it plans to sell its optical networking and carrier ethernet businesses to U.S.-based Ciena (CIEN.O) in a stalking horse agreement worth $521 million.

The cash and stock offer includes all assets of the optical networking and carrier ethernet businesses globally as well as patents and other intellectual property.

Under the terms of the deal, Ciena will pay $390 million in cash and another 10 million common shares. Ciena shares last traded at $13.05 on Nasdaq on Tuesday, Reuters reported.

The proposed transaction would 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 $131 million, bringing the value of the consideration to approximately $521 million. The assets to be acquired generated approximately $1.36 billion in revenue for Nortel in 2008 and $556 million (unaudited) in the first six months of 2009.

“This is a unique and exciting opportunity for us to accelerate our existing strategy and the pace of our growth plans by two to three years,” said Gary Smith, Ciena’s CEO and president. “We believe this transaction will position us for faster growth by giving us greater geographic reach, broader customer relationships and a deeper portfolio of solutions. We believe we are best positioned to leverage these assets, thereby creating a significant challenger to traditional network vendors.”

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