Isn’t there a law against that? Oh wait, wrong capitalization. Blockbuster news it was not, however the announcement by Ciena (NASDAQ:CIEN, news, filings) that it is in advanced discussions with Nortel over its Metro Ethernet Networks (MEN) business did help to clear the air a bit. Their expected interest in purchasing the unit has been mentioned for many months, and supposedly somebody even jumped the gun last Friday with an early PR according to an article on SeekingAlpha. At least now we can get beyond speculating about talks everyone ‘knew’ were happening, but didn’t actually know were happening.
I’ll go out on a limb and say that this deal will probably happen. All the ingredients are in place. A willing seller to say the least, a buyer with a clear business case for the buyout, and a $1B cash stockpile. Now, some say that Nortel’s MEN unit could fetch $700-800M, and it would probably not be smart for Ciena to deplete their reserves in that way. However, they probably won’t have to. The credit markets may not be open wide right now, but they can probably get the money simply because they don’t need it. You know, the ‘bankers loan umbrellas only when it isn’t raining’ theory. Of course, even if they do come to an agreement, it would probably be as the stalking horse bidder in the usual bankruptcy auction procedure.
Though not surprising strategically, it would be a big, big, big deal for Ciena. Nortel’s MEN had $333M in revenue last quarter, more than twice Ciena entire $165M for the same period. Opportunity knocks, but any acquisition this large takes a leap of faith by shareholders. Hence, as some knees got weak, Ciena’s stock went down on the news. Just wait until the price tag, hehehe.
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Ed Gubbins has a nice piece on the transformative possibilities of the deal: http://blog.telephonyonline.com/unfiltered/2009/10/06/ciena-nears-transformative-nortel-deal/