Ciena to pay $769 mln for some Nortel assets

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Ciena Corporation will buy Nortel Networks Corporation's optical networking and carrier ethernet business for USD 769 million after trumping Nokia Siemens Networks in a three-day auction, sources told Reuters on Sunday.

Last month, the US network equipment maker announced it had made a stalking-horse offer for these assets of Nortel, the Canada-based telecommunications company that filed for bankruptcy in January and has been auctioning off assets.

The stalking-horse bid set a floor price, but Nortel was free to seek higher offers.

Ciena's winning offer consists of USD 530 million in cash and USD 239 million in convertible notes, one of the sources said, speaking on condition of anonymity since details of the auction have not been made public.

Ciena initially offered USD 390 million in cash and 10 million shares of Ciena stock, for a total deal value of USD 522 million, based on the Friday closing price of Ciena stock.

On November 18, another source familiar with the sale told Reuters that Nokia Siemens Networks and private equity firm One Equity Partners had also jointly bid for the assets.

Representatives for Ciena and Nortel did not return calls seeking comment. Nokia Siemens declined to comment.

CIENA LIKES THE DEAL

For Ciena, the purchase of these core assets in Nortel's metro ethernet networks business is an opportunity to increase sales.

The equipment manufactured by these companies is used to build the Internet infrastructure that supports corporate and residential networks.

But analysts and investors have been concerned that the deal will weigh down Ciena's operations, hurting the US company's shares in recent weeks.

To integrate the potential acquisition, Ciena would have to swallow a unit that earned USD1.36 billion in 2008 revenue - higher than the USD 902 million it earned in the same period.

Ciena has total cash and securities of just over USD 1 billion and USD 798 million of debt on its balance sheet, according to regulatory filings.

Its latest offer includes the issue of USD 239 million in debt in the form of convertible notes. The interest rate for the senior notes, due June 15, 2017, is 6%, one of the sources said. Under the terms, the interest rate would increase gradually to 8% if Ciena's share price falls, this person said.

The final bid by Nokia Siemens Networks and One Equity, which manages USD8 billion in investments for JPMorgan, came "very close" to Ciena's offer, the source said.

Winning the auction for these Nortel assets would have helped Nokia Siemens, a 50-50 joint venture of Nokia and Siemens AG, expand its US presence. The company has said North America along with India, Japan and China, are its four top growth targets.