GENBAND makes "stalking horse" bid for Nortel's CVAS division

GENBAND is the first to step out of the speculation mill and launch a "stalking horse" bid for Nortel's Carrier VoIP and Application Solutions (CVAS) business.

Working in conjunction with its shareholder One Equity Partners to launch the bid, GENBAND said the purchase price for the CVAS unit is $282 million, but the "total cost of ownership [is] in excess of $400 million."

GENBAND's "stalking horse" bid encompasses Nortel's CVAS business in four regions: North America, Caribbean, Latin America and Asia. Then, in a separate asset-sale purchase GENBAND will acquire all of Nortel's CVAS assets in Europe, Middle East and Africa for $282 million, subject to balance sheet and other adjustments currently estimated at approximately US$100 million.

The Plano, Texas' proposed deal combines its next-gen access, trunking, session and security gateway technology and Nortel's softswitch and application technology. What's more, the CVAS division also comes with key customers AT&T and Verizon.

Joe McGarvey, Principal Analyst at Current Analysis said from GENBAND's perspective, that while the proposed acquisition is consistent with the company's drive to add more assets to its portfolio, he believes the value depends on what GENBAND takes or does not take from CVAS.
  
"There's a lot of pieces in the CVAS portfolio, some of which would be valuable to GENBAND and some of which might create conflicts or overlap," he said. "As an example of the former, Nortel's CS 1500 appears to open up opportunities in the North American rural market, as a Class 5 alternative. At the same time, however, GENBAND had already acquired--and divested--similar assets: the T7000 Class 5 switch it acquired with the purchase of Tekelec's switching unit."

But while GENBAND may be the first to make a bid on Nortel's CVAS unit, they probably won't be the last. Similar to the auction of its wireless, enterprise unit and, more recently, Metro Ethernet Networks (MEN) division, these sales tend to draw a number of bidders to the table.

Other potential bidders to emerge in the Nortel CVAS auction process could include Nokia Siemens Networks, NEC and Sonus Networks.

However, McGarvey was skeptical of NSN--a company that lost out to Ericsson and Ciena to acquire Nortel's MEN and CDMA/LTE assets--making a bid for the CVAS unit. "As for NSN entering the bidding process, I'm not so sure about that," he said. "The company has already sold off its North American DCO business--to GENBAND. I'm not sure they desire to purchase another stake in that market. Plus, NSN already owns a SIP application server."

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