Lucent Technologies Inc. said it agreed to purchase Ethernet developer Riverstone Networks’ assets for $170 million in cash.
Most of Riverstone’s employees are expected to join Lucent as part of the company’s Multimedia Network Solutions business.
“We are extremely pleased and energized to join forces with an industry leader that we have admired and with which we have closely collaborated over the past year,” said Oscar Rodriguez, president and chief executive officer of Riverstone.
The two companies have worked together delivering carrier-grade Ethernet routers to service providers.
Under terms of the agreement, Riverstone agreed to conduct the sale of its business under the provision of Chapter 11 bankruptcy code. Riverstone said it plans to pay off its liabilities, including a $65 million loan. Any remaining cash is set to be distributed to Riverstone’s shareholders as part of a plan of liquidation, the companies said.
Analysts noted this deal benefits both companies.
“The move is very important to Riverstone and Lucent since the former was challenged to penetrate the emerging market as a Tier 1 provider, and the latter lacked the direct product suite necessary to address the new demands of the carrier Ethernet market,” said Glen Hunt, senior carrier infrastructure analyst for Current Analysis Inc. “The acquisition also provides Riverstone’s shareholders and investors with a liquid exit strategy with the deal closing by the middle of 2006.”
The companies noted that the transaction is subject to the customary regulatory approvals and bankruptcy court approval of the final sale terms. No shareholder consent is required.
Both companies added that the agreement also hinges on the resolution of the Securities and Exchange Commission’s pending investigation of accounting issues that arose under Riverstone’s prior management.
“The Securities and Exchange Commission, although it appears to be willing to cooperate, could be cause for concern if it does not agree to withdraw its pending investigation of Riverstone,” Hunt warned. “The company has consented to revoke the registration of the company’s stock under the Exchange Act, which should satisfy the commission if Lucent’s deal is consumated.”
In other Lucent news, the company announced it plans to partner with IBM Corp. to deliver Internet Protocol Multimedia Subsystem solutions that the companies said would help accelerate the introduction of blended services for wireless and wireline carriers. Both companies said they plan to jointly develop, test and deliver IMS infrastructure, service creation and network management solutions, including billing and operating systems solutions.
The companies said they are creating pre-IMS joint solutions for a number of services providers and explained that they are conducting proof-of-concept testing with five different service providers and have had joint discussions with several others in Europe, Asia and North America.
Terms of the agreement were not disclosed.
