Telecom Ramblings

Last week it appeared to be all over.  They had an auction for Nortel’s MEN division and Ciena (CIEN: chart, news) came out with the top bid, ’nuff said right?  But apparently Nokia Siemans’ best bid was not actually its best bid, since according to a Reuters report they have now raised it to $810M in cash.  After adding the $21M that Nortel would have to pay Ciena to call off its deal, that’s an additional $20M above Ciena’s $769M winning bid.  

That’s obviously not all there is to it, else NSN would have no leg to stand on here.  The question seems to come down to the details of the convertible notes that Ciena plans to use to pay for $239M of the total price.  NSN is offering all cash, basically making the argument that their offer is all cash and therefore safer for Nortel’s creditors.  A private equity group, MatlinPatterson, seems to be on their side as well.  Fairness here is entirely in the eye of the beholder, but the only eye that probably matters is that of the judge.

There would have to be some pretty ugly undisclosed details in the terms of the convert to justify such a move wouldn’t there?  Holding an auction, declaring a winner, and then changing the rules because one of the bidders misjudged its competition seems like a bad precedent.