Avaya Inks Merger Agreement With Private Firms

Written by Channel
June 4, 2007

Rumors were laid to rest late Monday as Avaya Inc. announced it has accepted a private equity buyout deal worth about $8.2 billion.

The buyers Silver Lake LP and TPG Inc. will pay $17.50 per share for the Basking Ridge, N.J., equipment maker.

Investors said their firms looked to Avaya in part for its leadership and innovation in IP communications.

Avaya’s board of directors has approved the merger and will ask its shareholders to do the same. The transaction should close this fall, although Avaya is free to solicit other proposals during the next 50 days.

The investment in our people and technology and the operating structure will enable us to extend our technology and services leadership, said Louis DAmbrosio, Avayas president and CEO, in a news release. The Wall Street Journal, which broke the news of Avayas possible buyout, quoted DAmbrosio as saying he plans to stay in his position, but that he couldnt speak for other execs.

Credit Suisse is serving as exclusive financial adviser to Avaya and its board of directors. Weil, Gotshal & Manges LLP acted as legal adviser to Avaya. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal adviser to Avaya’s board.

Citi and Morgan Stanley acted as financial advisers to Silver Lake and TPG and have committed, together with JPMorgan, to provide debt financing for the transaction.

Ropes & Gray is acting as legal adviser to Silver Lake and TPG.

The private deal presumably is a blow to Nortel Networks, which was reported to be in merger talks with Avaya. But, when contacted last week by PHONE+/xchange, Nortel would not confirm the speculation.

The WSJ also quoted a source who said Cisco Systems Inc. had met with Avaya last month to discuss a merger.

TPG Capital two weeks ago bought Alltel Corp., as well, more evidence of the increased appetite among investors for telecom deals.

Avaya Inc. www.avaya.com
Cisco Systems Inc. www.cisco.com
Nortel Networks www.nortel.com
Silver Lake LP www.silverlake.com
TPG Inc. www.texaspacificgroup.com