Nokia Siemens Networks counters Ciena's offer for Nortel's metro assets

Let battle commence

The company says it will raise its offer to $810 million in cash, compared with Ciena $769 million cash and debt bid.

US networking gear maker Ciena trumped an offer by Nokia Siemens and its financial partner, One Equity Partners, in a three-day auction in November with an offer of $530 million in cash and $239 million in debt.

The US Bankruptcy Court for the District of Delaware will decide whether to approve the deal on Wednesday.

"We continue to believe that the convertible notes offered by the competitive bidder carry significant risk and should not be valued the same as cash," said Nokia Siemens spokesman Barry French.

To fund the debt portion, Ciena plans to issue $239 million in the form of convertible notes, at an interest rate of between 6 per cent and 8 percent.

Nokia Siemens, a 50-50 joint venture of Nokia and Siemens, joins one of Nortel's largest creditors, private equity firm MatlinPatterson, in objecting to the Ciena deal.

Last week, the private equity firm filed a limited objection in court, saying Nokia Siemens' offer exceeded the cash component of Ciena's offer by $200 million.

MatlinPatterson has sought more information from the court on the terms of Ciena's convertible notes.

Ciena shares rose nearly 2 per cent on Nokia Siemens' plan, and closed up 1.1 per cent at $12.28 on the Nasdaq on Tuesday.

After Ciena won the auction last week its shares fell sharply, as investors worried about how the company would integrate the assets, which are expected to double Ciena's size, and cope with an increased debt load.

The deal, if approved, would put Ciena into third place in the optical network equipment market, behind rivals Alcatel-Lucent and Huawei Technologies.

In October, Ciena entered into an agreement with Nortel to buy these assets for roughly $520 million, including $390 million in cash and 10 million in shares of Ciena stock. The agreement allowed the

Canadian telecommunications company, which is selling assets after filing for bankruptcy in January, to seek higher offers.

Nokia Siemens, which teamed up with private equity firm One Equity, put in a final bid of $770 million, but Nortel chose Ciena.

Under their agreement, Nortel would have to pay Ciena about $21 million in breakup fees and expenses if it chooses another buyer.

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