Ciena set to pick up Nortel’s optical and carrier Ethernet business

Carrier network specialist Ciena has forged an agreement with Nortel to acquire the exiting Canadian firm’s optical networking and carrier Ethernet assets for $390m in cash and ten million shares of Ciena common stock estimated to be worth a further $131m.

The assets are owned by Nortel’s Metro Ethernet Networks (MEN) business and include the firm’s long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Ethernet transport, aggregation and switching technology, multiservice SONET/SDH product families, and network management software products.

Gary Smith, Ciena’s CEO and president, said he believes the transaction will position the firm for faster growth through greater geographic reach and a deeper portfolio of solutions.

The company intends to make employment offers to at least 2,000 Nortel employees under the deal, with Ciena expecting to incur integration-related costs of approximately $180m.

As we have seen with Nortel’s other asset sales, this proposed transaction is also subject to a competitive bidding process and requires the approval of the United States Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice. Ciena expects hearings before these courts to be held within the next several weeks.

Earlier this month Nortel said it is planning to sell off its GSM and GSM-R (GSM for railways) assets via an open auction process. The business transaction will also include GSM related patents and non-exclusive licenses to other relevant patents.

Subject to approval of the bidding procedures filed with the US and Canadian courts, qualified bidders will be required to submit offers for the assets by November 5, 2009. The auction itself is scheduled for November 9.