Nortel Unit Auction Postponed -Update:
<<Nortel Said to Take More Time to Sell Optical Unit (Update2)
By Serena Saitto and Hugo Miller
Nov. 10 (Bloomberg) -- Nortel Networks Corp., the insolvent Canadian phone-equipment maker, is giving potential acquirers more time to make an offer for its optical-networking business, said two people familiar with the matter.
Bids were due yesterday, and Nortel extended that deadline, said one of the people, who declined to be identified because the auction isn’t public. The company can postpone the deadline by as many as five business days, the person said, declining to elaborate.
Nortel is seeking higher offers after Ciena Corp. agreed to buy the unit last month in a stalking-horse bid, where one party makes a lead offer others can try to top. Ciena offered $390 million in cash and 10 million shares of common stock, for a total of about $515 million based on yesterday’s close.
“One thing that’s telling is that all the previous deals were all-cash deals, suggesting that the interest for this business may not have been that strong,” said Ari Bensinger, an analyst at Standard & Poor’s in New York. “An all-cash deal without the volatility of a stock price would have made more sense to them.”
Bensinger, who has a “hold” rating on Ciena shares, said the Nortel unit may fetch as much as $800 million.
The Ethernet unit’s buyer could bolster video transmission and other Internet traffic within cities, and may gain Nortel customers in Asia and Europe, including Spain’s Telefonica SA. Sales at the Metro Ethernet networks business fell 27 percent to $333 million in the second quarter, Nortel reported in August.
Asset Sales
Nortel has been selling off businesses since entering bankruptcy protection in January. The Toronto-based company, which reported losses of almost $6 billion last year, has raised more than $2 billion so far from the asset sales.
In July, Ericsson AB agreed to pay $1.13 billion for Nortel’s wireless assets using code-division multiple access technology, a standard used by many North American networks. That beat Networks Siemens Networks’ original offer of $650 million. Two months later Avaya Inc. won Nortel’s corporate phone-gear unit with a bid of $915 million, after first offering $475 million.
Nokia Siemens, the second-biggest telecommunications equipment supplier after Ericsson, is considering a bid for Nortel’s optical-networking unit to expand in North America, two people close to the situation said last week. Other companies also are interested, one of the people said today.
Ben Roome, a spokesman for Espoo, Finland-based Nokia Siemens, declined to comment. Nortel spokesman Bo Gowan declined to comment. Nicole Anderson, a spokeswoman for Linthicum, Maryland-based Ciena, didn’t return a call seeking comment.
Ciena fell 26 cents to $12.20 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has dropped 17 percent since the company said it was in advanced talks to buy the Nortel unit.
“With the economy rebounding there could be more bidders,” Bensinger said. “For Ciena, acquiring the business strengthens its hand and keeps it out of those of a rival.”
To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net
Last Updated: November 10, 2009 16:12 EST >>
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