Nortel Skips Auction, Sells Unit To Genband

Abandoning plans for a competitive auction of its voice-over-Internet business unit, Nortel Networks will work to complete a sale to Genband for $182 million.

TORONTO (CP) -- Nortel Networks has abandoned plans for a competitive auction of its voice-over-Internet business unit and will work to complete a sale to Genband Inc., which is expected to make job offers to many of the current employees

The division specializes in technology for telecom carriers and includes soft switches, media gateways and a variety of related patents.

Under an agreement announced in December, Texas-based Genband will pay about US$182 million for the Nortel unit, and will also receive existing customer contracts.

The privately owned company had originally offered about US$282 million, subject to adjustments that Nortel said Wednesday will reduce the price by about $100 million.

The sale still requires court approval in both the United States and Canada in a joint hearing on March 3, as well as in Israel, with a targeted closing date in the second quarter.

Nortel's CVAS division was the only remaining piece of the company to report higher revenues in the third quarter, an increase of 14 per cent to $208 million.

"By melding these market-leading technologies into Genband, we will create the most comprehensive, standards-based switching portfolio in the world," said Genband president and chief executive Charles Vogt in a release.

"Joining forces with Genband will allow us to continue to provide a highly reliable solution and service offering to service providers and enterprises across the globe," said Samih Elhage, president of Nortel's applications solutions business.

Genband's offer was supposed to have marked an opening bid for an auction that was to start on Thursday, until Nortel abandoned that plan.

Nortel spokeswoman Jamie Moody said that other interested parties were talking to the company about acquiring the CVAS division, but that none of the discussions resulted in a "qualified bid."

In its announcement, Nortel said a "significant majority" of the unit's 2,100 employees will be offered jobs with Genband.

Genbrand had committed to making offers to 1,638 employees when it initially made its bid for the company in December, Moody added.

The announcement Wednesday marks another step toward the dismantling of Nortel, which has been under a court supervised bankruptcy restructuring since the January 2009.

Since then, the company has auctioned off most of its larger divisions in an attempt to pay back debtholders.

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