Avaya said late Monday it has entered a merger agreement with private-equity firms Silver Lake and TPG Capital for $8.2 billion, or $17.50/share, which represents a 28% premium from last week when The Wall Street Journal reported news of deal talks. The offer is 4.7% more than Avaya's $16.72 Monday close. A Piper Jaffray analyst commented, "Private equity will probably make it a stronger organization. From a shareholder perspective, it's definitely a good move." In a press release, it is mentioned Avaya has 50 days to solicit proposals from third parties and may respond to unsolicited proposals. Avaya has previously been in talks with both Cisco and Nortel. Private-equity is said to be attracted to telecom equipment makers because of their steady cash flow and low debt levels. Avaya has $829m of cash and carries zero debt.
Sources: Press release, Bloomberg, The Wall Street Journal
Commentary: Nortel's Possible Purchase of Avaya: Pros and Cons • Avaya Sale to TPG/Silver Lake May Be Imminent -- WSJ and NYT • Avaya: Report Company Close To $9B-Plus Sale
Stocks/ETFs to watch: Avaya Inc. (NYSE:AV), Nortel Networks Corp. (NT), Cisco Systems Inc. (NASDAQ:CSCO). Competitors: Alcatel-Lucent (ALU), Plantronics Inc. (NYSE:PLT). ETFs: iShares Goldman Sachs Network Index Fund (NYSEARCA:IGN), PowerShares Dynamic Networking (NYSE:PXQ)
Conference call transcripts: Avaya F2Q07
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