8-KLeadership ChangesAcquisitions & DispositionsMaterial Agreements+1

CIENA CORP 8-K Report, Material Agreement (Mar 25, 2010)

Filed March 25, 2010For Securities:CIEN

Summary

CIENA CORP (CIEN) filed an 8-K on March 25, 2010, to announce the completion of its acquisition of substantially all of the optical networking and Carrier Ethernet assets from Nortel's Metro Ethernet Networks (MEN) business. This significant acquisition was completed for an aggregate purchase price of $773.8 million USD, entirely in cash. The transaction is expected to be a key driver of Ciena's future growth and market position in the optical networking space. The filing details various material agreements entered into in connection with the acquisition, including a Transition Services Agreement with Nortel for essential business support, a lease agreement for a key facility in Ottawa, Canada, and an Intellectual Property License Agreement. These agreements are crucial for ensuring a smooth integration of the acquired assets and for Ciena to leverage Nortel's intellectual property. The company also announced the appointment of Philippe Morin, former President of Nortel's MEN business, as Senior Vice President, Global Products Group, highlighting the integration of key talent.

Key Highlights

  • 1Ciena Corporation completed the acquisition of substantially all of Nortel's Metro Ethernet Networks (MEN) business assets for $773.8 million USD in cash on March 19, 2010.
  • 2The acquisition includes Nortel MEN's long-haul optical transport, metro optical Ethernet, Carrier Ethernet technology, SONET/SDH products, and network management software.
  • 3A Transition Services Agreement (TSA) with Nortel is in place for up to 24 months (12 months in EMEA) to provide business support services, with an estimated annual cost of $94 million for Ciena.
  • 4Ciena entered into a lease agreement for a 265,000 sq ft facility at Nortel's Carling Campus in Ottawa, Canada, with an initial annual rent of approximately $7.2 million CAD.
  • 5An Intellectual Property License Agreement grants Ciena non-exclusive and exclusive licenses to use certain Nortel patents and intellectual property for optical networking and Carrier Ethernet products.
  • 6Philippe Morin, former President of Nortel's MEN business, has been appointed as Ciena's Senior Vice President, Global Products Group, effective March 19, 2010.
  • 7The purchase price is subject to a working capital adjustment, estimated to reduce the aggregate purchase price by approximately $62 million USD.

Frequently Asked Questions

Ciena acquired substantially all of Nortel's Metro Ethernet Networks (MEN) business assets, including their long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Carrier Ethernet technology, multiservice SONET/SDH product families, network management software products, and network implementation and support services.

The acquisition had an aggregate purchase price of $773.8 million USD, which was paid entirely in cash. The final price is subject to a working capital adjustment, estimated to decrease the purchase price by approximately $62 million USD. Ciena also replaced a portion of the original purchase price that was to be settled with convertible notes with cash, amounting to $243.8 million USD.

Ciena has entered into a Transition Services Agreement (TSA) with Nortel, which will provide essential business support services for up to 24 months (12 months in EMEA). These services include accounting, supply chain and logistics management, and IT support. The estimated annual cost for these services is $94 million.

Ciena obtained a non-exclusive license to use a broad range of Nortel's patents and intellectual property for manufacturing, selling, and supporting optical networking and Carrier Ethernet products. They also secured an exclusive license for a narrower set of IP within a specific field of use. In turn, Ciena granted Nortel a non-exclusive license to use certain acquired IP for Nortel's other business areas.