U.S. telecom equipment maker Avaya Inc has emerged as the successful bidder at a bankruptcy auction for a Nortel Networks Corp unit that builds corporate networks, and will pay $900 million for the business.
Avaya will also provide $15 million for an employee retention program, the companies said in announcing the deal Monday.
Our successful bid brings us closer to adding Nortel and its complementary channel, portfolio, research and development, and global presence to Avaya, Avaya Chief Executive Kevin Kennedy said in a statement.
We believe the acquisition brings inherent value to both organizations' customers, employees and partners, and we look forward to its successful conclusion, he said.
Avaya's bid for the Nortel unit was considered a stalking horse offer, which meant it set the floor for any other bids. Avaya's bid was previously thought to be $475 million. Nortel said additional bids had come in, making it likely Avaya raised its bid to win the auction.
Nortel, once North America's biggest maker of telephone gear, filed for bankruptcy protection in January, blaming the economic crisis for derailing its turnaround efforts. It later decided it could generate more value for creditors by selling itself off in pieces rather than trying to restructure itself into a viable business.
Last week, Verizon Communications said it was ready to oppose the sale to Avaya, citing public safety and security concerns.
Avaya and Verizon, a U.S. telecom company, had been in talks to resolve Verizon's concerns about its contracts with Nortel. Verizon had said it would oppose the sale to Avaya if Verizon's existing contracts were not taken up and serviced by Avaya.
Nortel Enterprise Solutions President Joel Hackney said it would be business as usual as Avaya integrates the business.
The sale is subject to court approval in the United States, Canada, France and Israel as well as other regulatory approvals.
Nortel expects the deal to close late in the fourth quarter. (Reporting by Andrea Hopkins; additional reporting by R. Manikandan in Bangalore; editing by John Wallace)