Fiber-optic gearmaker Ciena Corp. has agreed to buy the optical networking and carrier Ethernet portions of Nortel Networks Corp.’s Metro Ethernet division for about $521 million in cash and stock. Ciena said it intends to use the assets to extend its business on the global stage.
Ciena is making a “stalking horse bid” for the assets, which means the sale will come in the form of an auction that other bidders can join. The deal, if it stands, will close in the first calendar quarter of 2010.
If successful at this price, which includes $390 million in cash and 10 million shares of Ciena common stock, Ciena might be getting a bargain. The assets generated around $1.36 billion in revenue for Nortel in 2008 and $556 million in the first six months of 2009 when it became clear that Nortel was in desperate straits. Ciena also will gain an optical networking business that serves 1,000 customers in more than 65 countries. Executives said on a conference call Wednesday that they expected the assets to start adding to earnings beginning as soon as fiscal year 2011.
If Ciena is successful, CEO Gary Smith said it would hire up to 85 percent of the division’s existing Nortel employees, about 2,000 workers.
Nortel already has sold its wireless division to Nokia-Siemens Networks, and its enterprise division went to Avaya Inc. The bankrupt Toronto-based company has raised more than $2 billion from asset sales to date.