Avaya set to buy Nortel enterprise business for $475 million

As expected, Nortel has entered into a "stalking horse" asset and share sale agreement with Avaya for its Enterprise Solutions business.

The purchase price is set at $475 million. Reports surfaced last month that Avaya was preparing an offer for the business.
The agreement includes the planned sale of substantially all of the assets of the Enterprise Solutions business globally as well as the shares of Nortel Government Solutions and DiamondWare, a maker of softphones.

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In a statement, Nortel CEO Mike Zafirovski said: "We continue to be fully focused on running our operations and continuing to serve our customers while actively engaged in the sale of our businesses. We have determined that the sale of our businesses maximizes value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible. The CDMA and LTE Access stalking horse asset sale agreement announced on June 19th, and today's agreements around our Enterprise business are solid proof of that value. This represents the best path forward, and we are advancing in our discussions with interested parties for our other businesses.

"The many customers I have spoken with have been highly supportive of our efforts and transparency throughout this process. They value our employees and technology platforms and are appreciative of our service levels which are at multi-year highs.

"Today's agreements underscore the value of Enterprise Solutions and the investments we have made in enterprise telephony, unified communications and data networking core competencies. If successfully completed, this transaction will provide clarity on the path forward for our Enterprise customers, partners and employees, and enable the industry to continue to benefit from Nortel-created technology, know-how and leading-edge innovation."

Avaya president and CEO Kevin Kennedy says the deal will benefit his company on several fronts.

"The addition of Nortel Enterprise Solutions will increase Avaya's global scale, expand our channel partner network, and strengthen our world-class portfolio of products and services," Kennedy said in a statement. "This is a strategic opportunity to acquire talent and complementary assets that position the combined company for growth and success. We are committed to protecting the communications investments of the customers of Avaya and Nortel, and to effectively executing the integration of Nortel Enterprise Solutions and Avaya."

One industry analyst sees the deal benefiting all parties involved.

“This puts Avaya ahead of Cisco for enterprise voice sales and enters them into the networking business," says Henry Dewing, an analyst at Forrester Research. "There are advantages for Avaya and Nortel -- achieving scope and scale to lead the worldwide communications market. There are opportunities for buyers to have a global vendor offering hardware, software, and services to advance their communications and collaboration capabilities. Both firms recognize the need to serve mixed vendor environments and leverage many channel options and partners for delivery.”