A Fight for MEN?

By Mark Evans | Published: December 1, 2009

The sale of Nortel’s metro ethernet and optical business to Ciena may not be a fait accompli.

According a Nokia Siemens Networks spokesman Barry French, the company plans to file an objection in bankruptcy court, and it is prepared to increase its bid to $810-million. The issue hinges on NSN’s contention that the $239-million in convertible notes that are part of Ciena’s $769-million winning bid “carry significant risk and should not be valued the same as cash”.

NSN was among the two bidders for MEN during a three-day auction last month. Ciena, which would double in size if the MEN deal is consummated, made an original “stalking horse” bid of $510-million.

More: Some comments from Barry French, who was good enough to pass them along given its midnight in Helsinki.

· We can confirm the our joint venture with OEP has offered $810 million in cash for the optical networking and carrier Ethernet assets of Nortel, a $40 million increase to our final bid in the auction.

· In addition, we have filed an objection in the bankruptcy court related to the sale of the Nortel optical networking and carrier Ethernet assets.

· We believe that our final offer of $770 million was better, and this improved bid is substantially better, than that of the initial auction winner, particularly given the all-cash nature of our offer.

· Along with our expert advisors, we continue to believe that the convertible notes offered by the stalking horse bidder carry significant risk and should not be valued the same as cash.

· We appreciate the efforts of the representatives of the creditors to deliver the best possible outcome for Nortel’s stakeholders and hope we can work with them further to improve that outcome.

· We will not speculate on the outcome of the court process.

This entry was posted in Financials, M&A. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

less

Barry French
he be da wench
of NSN
go' fight CIEN
yo, fo' da MEN!

wiki wiki wiki
qcboris

NSN and the private equity buddies could just wait a while. They will be able to pick up both Ciena and MEN for a song in a years time .
Teleguy

If NSN couldn't get it now, why do you think they will get a stronger, bigger company in the future with the optical market rising for the next decade or so?
NSN does not have an optical component worth spiting on, so I think the new Ciena will simply sell make them a customer. There is no point in NSN trying to acquire an optical unit now.
zeroman

if there is a worse, confused, mismanaged company then it is NSN. cannot believe it but what a bunch of idiots. they did not need private equity but still did, could go upto a billion on wireless assets. they could have had ciena for breakfast in the auction.

next time NSN do your homework and send some intelligent people instead of some really daft people who obviously do not know what they are doing. a bunch of new grad MBAs would have done better.

or better send some execs to an auction even its some village fair. going-going-gone and the bang of gavel means its over.
wasthere

Sue Spradley was very quiet since the first auction. Someone put a sticker on her mouth ?
Teleguy

It's possible her days are numbered. Their bidding attempts were gigantic failures.
wasthere

No not again ? History would repeat itself .
unhappynsn

the NSN Top Shots did it all alone...... not kidding
nolongerbelieve

Based on the statistics that we gathered so far, NSN will definitely bid for CVAS. And of course, the same statistic shows that it would fail.
wasthere

In all not bad for the creditors I would think. This leaves a major player($$$) for CVAS.
wasthere

After 7 hours of fighting here is the results : Ciena the winner but :

''To clear the last objection, Ciena agreed to change the pricing on its convertible securities under certain conditions.

"This increases the value to the estate," said Jennifer Feldsher, an attorney with Bracewell & Giuliani, which was representing creditor Matlinpatterson Global Investors. "We withdraw our objection."

http://www.reuters.com/article/americasPrivateEquityNews/idUSTRE5B14ZL20091203
scalppeeler

The fight lasted seven hours.
It's over.
NSN lost again.
Cienas bid is the winner and approval likely to come today also.
What a bunch of dolts at NSN even objecting only to be embarrassed yet again.
These guys are huge clowns.
random123

ERm, NSN just managed to make a major competitor of theirs effectively pay/risk MORE for MEN than they were going to previously.

From NSN's perspective, this alone made it worthwhile them going to court.

The more they got Ciena to pay, the stronger position NSN would be after Ciena bought it.
scalppeeler

I do not believe NSN are a competitor of Ciena.
Are NSN even in the optical space?
NSN were strictly interested in Gaining market access into NA with whatever
line of business they could get their hands on to get their foot in the door
for their own products.
Please explain how NSN is a competitor with Ciena?
random123

Basically NSN doesn't have optical today, it's a hole in their portfolio. They want it to win over big operators who want an end to end solution.

They didn't win the Nortel gear, but it wont stop them. They will now aim to get in by going for some alternative instead (although a comparable one? Doubt it). They are prepared to spend $800m to get an optical presence, that's how bad they want in.

When they do buy into optical, they want the competition to be as weak as possible. By making Ciena pay as much as this, it means they'll be in a relatively stronger position when they finally enter optical in future.
scalppeeler

So let me get this straight.
You've admitted NSN are not even in optical yet they want to get in.
If that was the case they would have outbid Ciena because nobody today in optical can match the current MEN 40G/100G solution all things considered. NSN chose to stop bidding when they did not want to go any further. NSN screwed up not only on Wireless, but on optical. If this won't stop them please enlighten us as to what their next moves might be? And I disagree about your 800 million comment. They had a chance to bid 800 million but they dropped out at 769 at the auction. Your logic and argument is all wrong here. Totally nonsensical. You are not talking to kindergarteners here. NSN won't only be competing against Ciena if and when they buy into optical. They'll be competing against fijutsi, the cheating asians and the fleur des lis alcatel amongst others. If NSN wanted to get into optical they would have sunk Ciena and bought MEN. NSN are not getting into optical. You heard it here first.
TellNo

>> They'll be competing against fijutsi, the cheating asians and the fleur des lis alcatel amongst others.

Is Fijitsu one of those 'cheating' aisans?

You can only defeat your enemy if you pay enough respect to them. If Nortel is so gloary as you said, they must have a very good reason why they are in bk now. oh, it must be global warming ...
scalppeeler

No Fijutsi are not.
By lowball tactics I mean Huaweii and ZTE.
Nortel has nothing to do with the lines of business that are being sold off now.
All the employees and lines of businesses have been cut loose of the titanic.
It's over.
random123

Good question, who will NSN go for next?
Possibly ADVA, Opnext(Stratalight) or Mintera. Infinera I doubt, too expensive.

.
Teleguy

NSN should not go for any of them. They have tried to get Nortel MEN on a bargain and dropped out when it got too rich for them. Acquiring second tier optical companies would require a boat-load of investment. There best bet is to partner with companies like the new Ciena to meet the optical needs of their customers. I think the days of telco companies trying to do everything are over. It's too expensive and the Chinese will just continue to undercut the prices. Nortel couldn't do it any longer; Alcatel-Lucent is having major problems (they seem to be where Nortel was a few years ago); NSN is having problems now.
felixmk

As a creditor, I like anyone who increases value in sale. Thanks to NSN and MatlinPatterson!
zeroman

well the balloon was pricked within a few hours that there was no standing.
wasthere

OK, time is money : First that fills-up our hats with $850 millions(cash) leaves with the 'MEN' .

The Creditors
yekcoh

Why the sudden reversal? What prompted NSN to do an about turn. Has it learned something that makes MEN more attracting now than 2 weeks ago?
vladhed

To summarize the lightreading article. NSN was upset when those running the auction decided that Ciena's bid was worth the required 10M more than their last 770M bid. Because they did not find the valuation of the bonds credible, they viewed this a like a shill bid designed to drive the price up. Since they didn't like the way it was being run they decided to leave and challenge it in court.

So, it sounds as if they were always willing to pay 810M, but felt that they should have been able to get it for 770M, but the way the auction was being run was going to cost them an extra 20M.

Can't blame them.
freqmgr

Again, E&Y and the Nortel "leadership" select the winners of the auction....nothing out of the ordinary for Nortel's non-conforming way of doing business there!
Lookahead

Why NSN did not put the cash plus its shares to bid at the first place? it is just the same as Ciena did. Then NSN would have much more cash reserved than Ciena instead of complaining now. It is quite strange that NSN's behavior on those auction bidding.
XPM_guy

Ciena's bid included convertible securities (bonds due in a few years with 6% interest), not shares of Ciena stock. NSN has access to plenty of cash via its venture-capital partner and is not keen to take on a lot of new debt. As the auction played out, Ciena offering more debt at face value and NSN objected to that valuation (i.e. blindly assuming that the securities could be sold for face value after Ciena's stock tanks due to Wall St's pessimism regarding Ciena's ability to capitalize on the full value of its MEN purchase).

So NSN abandoned the auction, which it saw as flawed, instead looking to the bankruptcy courts to remind everyone that in today's market corporate bonds do not always pay out at 100% (e.g. look at Nortel's bond debt). Not sure how well that will work for them - if the courts fail rubber-stamp the Nortel exec's decision, it would be the first time so far.

So I'm betting that Ciena will end up with MEN for less than NSN has stated it is willing to pay. Extra bonuses will then be awarded to the execs on the Nortel side for "maximizing stakeholder value" by accepting less money, some of which is questionable: par for the course.

Or not... We'll see!
Lookahead

Thanks XPM_guy for the explanation, it is getting interesting to see NSN versus Ciena wrestling. To me, it is just like NSN says: you won, but I do not like the way you played on the game.
NTlegacy

NSN is a joke. If they were willing to pay 810M, why didn't they bid this value during the auction? I hope their complaint will not be considered. Otherwise, i'm rather sure the MEN people will embark in another mismanaged company.
For me it' s bad looser screaming.
Go away NSN! Forget about MEN! Solve your internal problems first, to avoid these ridiculous exposures.
zeroman

is it possible that Ciena has agreements to hand out juicy roles to the execs. would be a conflictright there if the nortel execs are choosing who they go with.

the amount of stupidity at NSN is unbelievable. Sue Spradley is this your doing? putting those useless nortel skills to good use?
happy2b

I'd would have thought the creditors would want an all cash deal (a few more dollars in their pockets), over a cash and paper deal, by the time the paper is convertered to cash all of the creditors would be paid off and gone
Teleguy

Yes, but the creditors attended the auction and had to agree to the final bid. I am not clear how NSN hopes to sway them with what amounts to another $20 million higher bid (after you factor in the penalty that Nortel will have to pay Ciena for losing the auction as the stalking horse). It appears desperate and not well planned.
whopperscan

Nokia do appear to be very undecisive about Nortel fire sale opportunities. In Wireless, there are Eric, Noikia and the rest. Nokia has 50 billion Euro in sales and low debt. They're not going to get much more successful in wireless, so one assumes they're looking to grow into other markets such as optical transmission & metro ethernet, perhaps even add some carrier and IP strings to their bow via CVAS (and if I were CVAS folks I'd hope that's what they're thinking). They were hopelessly late in the first place (forced a postponed auction by desperate sellers). But even then, appeared unprepared and uncertain. But what on earth are Nokia in bed with some private equity mob for? What could a partnership with PE possibly bring? Nothing good that I can imagine...
bankrupt_bob

A bidding war?! ;>)
timross

If NSN really did offer $770M cash I cannot understand why a slightly lower bid that was 30% in 'notes' took precedence (perhaps someone could explain what the security of these notes is and what upside their might be to compensate for the risk).
As a creditor of Nortel I would like to see the maximum amount raised - and the NSN offer, particularly the revised one, seems to provide that. E&Y have been completely hard headed in other dealings, so why the curious approach here?
freqmgr

Remember, Nortel's "expert" management, along with E&Y, really select who wins. Something, open or in the details, made the other offer more lucrative to those making the decision.
random123

If a new NSN bid is accepted after the event, then what's to stop Ciena raising their own bid again, too?

Accepting bids after the event would open up all sorts of problems. Both bidders could argue over the terms, stating that MEN value is fluctuating further over time. The sellers (E&Y) would be operating in a grey area & risking the collapse of any deal at all. CIENA would counter-claim as the auction was won legally and they are incurring costs with cash transfers etc. currently.

Ernst & Young would not have considered the CIENA notes lightly. They will have undergone due diligence and decided that their value was solid enough to be accepted. They have to do this for the creditors *by law*, otherwise the creditors would later sue them for not having valued the notes correctly.

Further, if a new NSN bid were accepted now, then it would screw over any future auction. Why would I go through the pain of bidding to a deadline when I see that further bids are accepted and ther courts are involved following an auctions end? No: it would discourage bidders from being involved in any further auctions.

NSN didn't have the 40 million atthe time of the auction. Now they've managed to find the extra cash they are stepping back in. Sorry NSN, the buying time is over, you should've tried harder to get that extra 40 together whilst it was on.

NSN... too little too late. Yet again.
protosphere

heh, CIEN's convertable notes are more secure than the $2B notes Nortel printed, after the $2B bonds that neglected specifically listing the largest pension shortfall in Canada, than a mere footnote. I think they will believe CIEN's notes are more stable than NSN claims.

Good luck making a done deal more gleeful than jeopardize or delay it. Besides, others have tried to change the terms of the deal like Verizon and RIM to no avail.

If they were so interested why didn't they stalk this sooner than come late to the party.

heh... hile NSN... might have fit into Nortel's culture better but too late now ... can't see them not betting on CIEN than NSN who took out loans and wanted EDC welfare like the kettle calling the frying pan black-ass. Always some turmoil when it comes to Nortel.

I suspect this is sold and all they want to see is it sold at this point with no further problems. I'd be surprised if anyone could influence these impenetrable courts.
less

This could mean MEN execs will have to hire some expensive suits to recalculate their potential bonuses upward. Shame on NSN. And what the heck, fie on Cisco, too!
zeroman

well MP have also objected. NSN offered 770 million. Ciena took it away for 769 million. um what was NSN doing - if they wanted they could have bumped it to 810 right then or even 850.

sounds like a poor afterthought loser not knowing what it should have done.
ntpurgatory

That's it, MEN - there ya go... take the attention away from GSM so it can get rubber stamped tomorrow...

By the way, AAN readers - what of CVAS? Will an auction date be announced this year?
XPM_guy

My theory is that since CVAS is the only division not losing money hand-over-fist (in fact it turned a profit in Q3), they have intentionally put off working on its sale until last - more bonus payouts for the execs that way than if they sold Nortel's once-and-current cash cow earlier in the butchering process. I guess they are waiting for CVAS to lose money as well before they'll allow it to be sold...

Rumor has it that there are plenty of "interested parties": some large companies, some small companies, and a few vulture-capitalists. But who knows what's really going on - based on their long track record of dissembling, deception, and outright lies, we can't trust a word that comes out of Nortel's current executive ranks so it's a wait-and-see game...

Personally, I think there is still a sizable demand for CVAS' products and services in the marketplace (the only part of Nortel that ever actually was / is a Global Leader), but sales will dry up significantly unless they announce an auction before year's end. If they execs fail to declare a CVAS buyer before February, 2010, then I would expect sales to seriously tank - possibly to the point where they can never recover even if a sale does finally goes through (i.e. the top Nortel folks who failed at running CVAS will then also fail at selling CVAS - more's the pity, but no doubt they'll be sure to pay themselves another hefty round of bonuses for their efforts)...
whopperscan

Yeah the silence on CVAS can't be good.. I hope they announce it. Beats me why they haven't put it up for auction already. The longer they wait, the more sales must tank, the less it's worth.
ntpurgatory

GSM auction validated your comment. If they'd waited another month maybe the $108m joint purchase price becomes $45m. CVAS needs to set up a lemonade stand or have their employees work the other vendor's campuses with sandwich boards to help drive a sale...
wasthere

Yep, I agree , to close to declare a winner. Let's schedule another fight ..... oupss I mean auction. This one should be public thought so Nortels creditors could make money selling seats ;-)

Looks like there's been talks between Nokia Siemens and MatlinPatterson.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj3FNlqnJrTI
curiousitykilledthecat

NSN and MatlinPatterson talking... could that be a conflict of interest?
wasthere

Who said : it's not over till it's over ?
What a saga . For sure Nortel will make corporate history !
Teleguy

Who cares what Barry French thinks. The auction had the creditors present who agreed that the Ciena deal was better. Even if it is more cash, it's not enough more cash. And why is it coming this late? The court approval of the deal is tomorrow (Dec. 2).

I think NSN is beginning to sound like the desperate housewife of telecom.
nolongerbelieve

My bet is that the NSN desperate housewife of telecom cannot get MEN no matter how hard they try. But they would pick up CVAS, out of extreme desperation and face saving.
less

Barry French
he be da wench
of NSN
go' fight CIEN
yo, fo' da MEN!

wiki wiki wiki
cieMEN

is this one of those mud wrestling contest ? Can I watch ?

	Facebook
	Twitter: markevans
	LinkedIn: Mark Evans
	FriendFeed
	Flickr

A Fight for MEN?

Mark’s Blogs

Find ME Online

Categories

Blogroll