Nortel Networks Corporation today announced that it, its principal operating subsidiary Nortel Networks Limited (NNL), and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited (in administration), have entered into a "stalking horse" asset sale agreement with GENBAND, Inc. (GENBAND) for the sale of substantially all of the assets of its North America, Caribbean and Latin America (CALA) and Asia Carrier VoIP and Application Solutions (CVAS) business, and an asset sale agreement with GENBAND for the sale of substantially all of the assets of the Europe, Middle East and Africa (EMEA) portion of its CVAS business for a purchase price of US$282 million, subject to balance sheet and other adjustments currently estimated at approximately US$100 million.
These agreements include the planned sale of substantially all assets of the CVAS business globally including softswitching, gateways and SIP applications. These agreements also include all patents and intellectual property that are predominantly used in the CVAS business.
GENBAND has teamed with one of its existing shareholders, One Equity Partners III, L.P. (OEP), to assist in financing the proposed purchase of Nortel's CVAS assets. OEP manages investments and commitments for JP Morgan Chase & Co. in private equity transactions.
Currently, subject to the terms of these agreements as well as any changes that may occur through the stalking horse and sale process, a significant majority of CVAS employees would have the opportunity to continue employment with GENBAND. This includes the employees assigned to the CVAS business in certain EMEA jurisdictions who would transfer to GENBAND by operation of law.
In early January, Nortel expects to seek U.S. and Canadian court approvals for bidding procedures, including a bid deadline and tentative auction date.
Commenting on the announcement, Samih Elhage, President of Nortel's CVAS business said:
"The proposed transaction represents a clear and positive step forward for Nortel's CVAS customers, employees, and business. Today's announcement is a strong endorsement of our continued leadership in the Carrier VoIP market where we have held the #1 position since 2002."
Elhage continued: "Nortel's industry-leadership in Carrier VoIP would not be possible without the continued commitment and support of our strong and loyal customer base of leading carriers across the globe. Throughout this process, Nortel will remain focused on providing our customers the highest level of service, support and responsiveness that they have come to expect from our team. Today's news is also a testament to our employees, whose commitment to innovation and customer support has ensured our growth in market share in 2009 despite a challenging economy."
Nortel is the recognized leader in the Carrier VoIP space, having shipped more than 118 million Carrier VoIP and Multimedia ports, including over 10 million SIP lines to leading wireline and wireless carriers globally. In addition, Nortel has secured business with 10 leading service providers since late 2008 and has gained more than 40 new Carrier VoIP customers since the beginning of 2009.
Details of Sale Process
Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice. Following completion of the bidding process, final approval of the U.S. and Canadian courts will be required.
In relation to the EMEA entities to which they are appointed, the UK Joint Administrators have the authority, without further court approval, to enter into the EMEA asset sale agreement on behalf of those relevant Nortel entities. In some EMEA jurisdictions, this transaction is subject to information and consultation with employee representatives and/or employees.
In addition to the processes and approvals outlined above, consummation of the transaction is subject to the satisfaction of regulatory and other conditions and the receipt of various approvals, including governmental approvals in Canada and the United States and the approval of the court in Israel. The agreements are also subject to purchase price adjustments under certain circumstances.
As previously announced, Nortel does not expect that the Company's common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.