Ciena shares were down nearly eight percent today after “a person familiar with the matter” informed Bloomberg that Ciena had offered $550 million for most of Nortel’s Metro Ethernet Networks (MEN) assets.
As Ciena said in a press release yesterday, any agreement would be subject to a competitive bidding process under the United States Bankruptcy Code and the Canadian Companies’ Creditors Arrangement Act.
Today’s information leak, via that “person familiar with the matter,” immediately follows Ciena’s proclamation of interest in Nortel’s MEN assets. The two events seem choreographed to bring competing bidders into the open.
Ciena’s shares fell today because analysts and investors have expressed concern about the company’s capacity to finance and integrate an acquisition of this size.
If Ciena meets competition for Nortel’s MEN assets at auction, it can expect to pay a lot more than $550 million. Most Ciena investors probably would prefer that the company walk away from the table if the sale price escalates much beyond the stated bid. In fact, many Ciena shareholders would prefer that the company extricate itself from the process now, before forking over more than a half-billion dollars.
For now, though, Ciena appears determined to see whether its initial offer, or something similar to it, is enough to close the deal.