Ciena Acquisition Bid Approved, but Nortel Postpones MEN Auction

Even though Ciena has received regulatory clearance to proceed with its proposed acquisition of insolvent Nortel Networks’ Metro Ethernet Networks (MEN) business assets for approximately $515 million in cash and stock, Nortel has deferred the bankruptcy-auction process in the hope that another bidder will emerge.

Bids were due yesterday for Nortel’s MEN assets, but Bloomberg reports that Nortel has extended the deadline by as many as five business days.

Clearly Nortel’s creditors believe, or hope, another bidder can be coaxed from the wings.

Murmurs surfaced last week that Nokia Siemens Networks (NSN) might take a run at Nortel’s MEN assets, but, as far as we know, the Finnish-German joint venture hasn’t thrown its binational hat into the auction ring. At one point, before NSN was said to be prepared to bid for Nortel’s MEN assets, reports circulated that Siemens, and perhaps even Nokia, wanted out of the joint venture entirely, discouraged by abstemious telecommunications spending and intensifying competition from rising Chinese vendors Huawei and ZTE.

Ciena’s stalking-horse bid, submitted last month, included $390 million in cash and 10 million shares of common stock. When Ciena first tendered its bid, its offer was worth approximately $521 million, but the value has declined slightly in the interim due to the fluctuating value of the company’s shares.

Until now, Nortel has sought cold hard cash for its business assets auctioned off under bankruptcy protection. It got $1.13 billion from Ericsson for its wireless assets and $915 million from Avaya for its enterprise business, though the latter transaction must pass an ongoing review by the Canadian government.

When CIena’s stalking-horse bid included stock, many observers felt it was a sign that Nortel didn’t expect heated competition for its MEN assets, which at one time were viewed as the company’s “crown jewels.”

Those jewels apparently are tarnished, because it’s becoming clear that Nortel is having to pull out all the stops — and then some — to persuade another party to join Ciena at the auction table.

The lack of competing bids has been good news for CIena, which was warned by analysts, including Mark Sue of RBC Markets, not to fall victim to the “winner’s curse” of overbidding to claim ownership of an asset.

Perhaps Nortel’s creditors have reason to believe another bidder is almost ready to declare interest, or maybe they’re just hoping one materializes. Whatever the case, the situation will be resolved soon enough.

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