Ciena shares dip after courts clear Nortel deal

AP News
Posted: Dec 03, 2009 1:48 PM

Ciena Corp. shares dipped Thursday as the company came a step closer to completing a $530 million acquisition of Nortel Networks Corp. assets.

Ciena and Nortel won rulings Wednesday from courts in the U.S. and Canada allowing the deal to go through as Nortel sells off its businesses under Chapter 11 proceedings. On top of $530 million in cash, Ciena is also taking on $239 million in convertible debt, which comes due in June 2017.

In a client note, Jefferies analyst George Notter said the acquisition poses serious risks for Ciena.

"Among a myriad of issues, no one on Ciena's management team has ever been involved in integrating a business of this size much less acquired a business out of bankruptcy," he said.

In a deal slated to close some time in the first quarter of next year, Ciena would take over Nortel's global optical networking and carrier ethernet businesses. It would get all products, contracts, and intellectual property, including technology that boosts the speed and capacity of fiber optic networks.

Courts in Delaware and Ontario denied a request to hold up the acquisition by Finnish rival Nokia Siemens Networks, which wanted a chance to make its own bid for the assets and said it would pay $810 million in cash for them.

Notter reiterated an "Underperform" rating on the company's stock.

Shares were down 65 cents, or 5 percent, to $12.23 in afternoon trading.