Nortel Plans to Auction Enterprise Solutions Business

Nortel Networks Corp., a telecommunications equipment maker in bankruptcy, said Monday it has entered into an agreement to auction off its global enterprise solutions business.

The Toronto-based company said it has entered into a $475 million "stalking horse" asset and share sale agreement with Avaya Inc., a privately held communications company in Basking Ridge, NJ.

This type of agreement lets a company in bankruptcy avoid getting a low bid on the sale of its assets. The company picks a "stalking horse" among a group of bidders for its assets. The chosen bidder offers a purchase price, which typically sets the floor for other bids.

Nortel is selling business units in North America, Asia, the Caribbean, Latin America, Europe, Middle East and Africa. The sale includes shares of Nortel Government Solutions Inc. and DiamondWare Ltd.

Nortel filed for bankruptcy protection in January in the U.S. and Canada, hobbled by a sharp downturn in orders from phone companies and looming debt payments. It has been exploring restructuring options, such as selling off assets.

A former tech highflier in the 1990s, Nortel at its zenith had more than 95,000 employees and a market capitalization of nearly $300 billion. At one point in 2000, Nortel accounted for a third of the market value of the Toronto Stock Exchange.

But it grew too quickly and overpaid for acquisitions. Nortel also ran into problems, including an investigation into its accounting practices that led to shareholder lawsuits.

Its market cap now hovers at $29 million. The stock is down to 6 cents Monday, up less than a penny in over-the-counter trading. Nortel's stock was delisted from the Toronto Stock Exchange in June.

Nortel said the asset sale will need the approval of the U.S. Bankruptcy Court in Delaware, Ontario Superior Court of Justice as well as courts in France and Israel.