Ciena, which last month had bid $521 million for the unit, had to up its bid in a three-day auction held over the weekend. Nokia Siemens Network had bid on two other Nortel units and also dropped out after being outbid. Nortel, once Canada's biggest company by market valuation, has been in bankruptcy proceedings since January and has been selling off its units one-by-one ever since. Still on the auction block is Nortel's GSM-R technology unit.
"These optical and carrier Ethernet assets bring exceptional technologies, talent and scale that will accelerate Ciena's current strategy to deliver innovative network solutions to customers worldwide," said Ciena's CEO and president Gary Smith in a statement Monday. "With this combination, we are bringing together complementary technologies in switching and transport to create an innovative powerhouse."
Some Ciena stockholders reacted negatively to the transaction, sending Ciena stock down more than 6% in early Monday trading.
Nortel hailed the deal and noted that Maryland-based Ciena said it will retain at least 2,000 employees in the unit.
Philippe Morin, president of Nortel's metro Ethernet networks operation, noted that the acquisition represents a major event for the optical industry, by creating an operation with an end-to-end portfolio.
The acquisition is subject to approval by U.S. and Canadian bankruptcy courts and Ciena said it expects the deal to close in the first quarter next year.
Like the auctioning of Nortel's other units, the optical and Ethernet auction was held under a stalking horse auction procedure in which an initial bid was made -- by Ciena in this case -- and other bidders were invited to trump earlier bids. Nokia Siemens Networks entered the bidding and drove up the price by about 50%. In the end, Nokia Siemens Networks, which also unsuccessfully bid for two other Nortel units, came away empty-handed.
Nokia Siemens Networks, which teamed with private equity firm One Equity Partners, said in a statement that it "believes that its final offer represented fair value for the assets, and further bidding could not be financially justified."