Avaya is the winning bidder for Nortel's enterprise solutions unit, agreeing to pay $900 million in cash and $15 million for an employee retention program. The companies confirmed the agreement in separate releases early Monday.
"Our successful bid brings us closer to adding Nortel and its complementary channel, portfolio, research and development, and global presence to Avaya," said Kevin Kennedy, president and CEO of Avaya, 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."
Toronto-based Nortel filed for bankruptcy protection in January 2009, seeking shelter from creditors after losing $5.8 billion last year.
Avaya, which had the early lead in the bidding process with a $475 million opening, preauction bid, will gain the assets of Nortel's global Enterprise Solutions business as well as Nortel Government Solutions Inc. and Diamondware Ltd.
"This is fantastic news for our customers, as this will empower us to continue to deliver industry-leading solutions and services focused on unlocking the enterprise business potential enabled by unified communications," said Nortel Enterprise Solutions President Joel Hackney in a statement. "It provides the capability to chart our future with laser focus, enabling customers to compete in new ways with greater scale and resources. We look forward to working closely with our customers, partners and stakeholders during this preclose phase to ensure that we continue to innovate to meet customers' needs with high-performance, efficient and secure communications solutions."
Added Chuck Saffell, CEO of Nortel Government Solutions: "With our combined knowledge of the federal market, we will be focused on delivering the best-performing, most cost-effective capabilities available to support our customers' mission. Our goal continues to be helping our customers provide security, livelihood and well-being for the citizens of the United States."
Nortel noted in its statement that Avaya and Nortel expect the deal to close in the fourth quarter of 2009 and will seek necessary Canadian and U.S. court approvals in a hearing scheduled for Sept. 15.
The deal is subject to court approval in the U.S., Canada, France and Israel as well as regulatory approval.
Hackney told ChannelWeb in early August that Nortel's channel need not fear the outcome of Nortel's sale and that Nortel had "gone a long way in stabilizing the business."
The comments came the same day former Nortel Networks CEO Mike Zafirovski stepped down and its board of directors was reduced from nine to three members.
Nortel for its second fiscal quarter reported $1.97 billion, a 25 percent drop year over year but up 14 percent sequentially from the first quarter of 2009.
In early comments Monday, Nortel sought to reassure channel partners.
"The independent members of the Nortel Distributor Alliance Council are excited about the future potential that today's announcement brings to the tens of thousands of enterprise customers we support," said Rick Dawybida, president of the Distributor Alliance Council Americas, in a statement. "We look forward to a commitment focused on ensuring customers can fully leverage their prior investments while also getting expanded choices. The combined portfolio capability of Avaya and Nortel will offer the marketplace industry-leading solutions as companies move aggressively to unified communications."
Hackney and other executives from Nortel were expected to speak in a call for media and analysts at 9:30 a.m. Eastern on Monday.