Only $100 Million, unbelievable!!!!
10 replies (most recent on top)
I noticed in the filing it is only 68M in cash rest assumed liabilities and 5M in cash for severance of employees they dont take.
Extreme's bid was just the starting point. Other bidders - and there will be many - have until April 18th to file necessary documents to participate in the auction. The auction will be held on May 23rd at 10:00 am EDT. Between now and April 18th, you can expect a number of companies to be looking at the networking business and performing a high level due diligence to decide what they want to bid at auction. It is true that the networking business has around $225M in annual sales and it is unprofitable in the current operation. That is the rationale for the $100M bid. Keep in mind that it is unprofitable only because of the bloated infrastructure and other obligations that Avaya has attached to the networking unit. Post acquisition, as the buyer integrates it into their business, there will be huge cuts and consolidations which will reduce the operating costs and help make it profitable. Make no mistake - the excitement you are feeling about the future of Avaya networking will soon fade as the harsh reality of the acquisition unfolds. It will be a bloodbath, my friends and only a few will survive. Extreme wouldn't be bidding if they didn't think this would be a profitable deal - read the CEO's statement. The only way they can accomplish that is to dramatically reduce cost.
Cisco and Huawei are lurking.. The execs are licking their chops for their bonus money.
They are not stupid. Extreme bidis just a bait from an old friend of KK. Avaya used to sell Extreme switches before they bought Nortel.
Heard Dell might get into the bidding war! Stay tuned
LOL ... Extreme stands to gain regardless of the outcome. They opened up with a low-ball bid, knowing someone else will probably outbid them. If they do win, they get a great deal and make themselves a more attractive takeover target. If they lose, they still end up acquired by another company (which is likely what they want in the first place), plus walk away with almost $4 mil to play with ... classic WIN-WIN.
" ... if another bid were to be entered Extreme could counter it and in the end if it lost out, Extreme would be entitled to a $3 million break-up fee plus and additional $750,000, the company stated."
here is a article that describes the deal in detail
http://www.networkworld.com/article/3178065/lan-wan/extreme-grabs-avaya-s-networking-business-for-100m.html?nsdr=true
There is nothing under the table about it all public info. If there were other interested parties they wouldn't take a stalking horse bid for 100M. Logic is they lose money on 200M of revenue so they are worth half that.
The price is not that far off -- maybe it could finish around $200M when all is done. Networking revenue in 2017 will be <$200M. Long way from what Nortel paid for Bay in 1999.
This only starts the bidding process. With the starting bid so low, there will undoubtedly be many others interested at a higher price. It will not end up with Extreme.
You have to look at the liabilities that will be loaded on extreme , when all applied the actual deal size will be at least 5 times the announced number which represents only the cash amount they will pay to Avaya which is very healthy