In case you haven’t heard Nortel’s MEN will be going to Ciena after a bit of a bidding war with NSN. For awhile it looked like Ciena would purchase the MEN assets for roughly $541Million in cash and equities which would have been roughly 40% of the annual revenue for the division. that would have been quite a coup.
Towards the end of the bid period NSN announced their interest and Nortel exercised their right to extend the bid period in order to accomodate the new potential suitor. In the end Ciena increased their offer to $530Million in cash and $239Million in convertible notes for a total (current) offer of $739Million.
As one can imagine this is the hot topic in this industry at the moment and most of the conversations I’ve had seem to end up talking about this in one way or another. A number of people have suggested that NSN is in a very difficult position after bidding for Nortel’s assets twice and losing; Once for the LTE and losing the bid to Ericsson and once for the MEN and losing to Ciena.
I would take a different tact and suggest that NSN knows the value of the assets they bid on and while they might feel the purchase necessary to their core business, they went into each bid with a plan on how much the assets were worth and they stuck to it. In the case of the Nortel LTE bid in July (lost to Ericsson) NSN has been somewhat vindicated as many people in the industry think that Ericsson paid entirely too much.
If we consider Ciena’s likely financial position after the acquisition completes in Q1 2010, it looks like Ciena will go from a net cash position of roughly $260 million to a net debt position of over $500Million. this leads me to believe that Ciena considers this purchase to be so important that it was willing to “bet the farm” to get it done.
I’m very interested to see how this acquisition with it’s potential product overlaps, skittish existing customers and 2000 strong Nortel workforce will play out.
