Avaya to Sell Networking Business to Extreme for $100m

Avaya, which on January 19th filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code, has announced it that has entered into an asset purchase agreement under which Extreme Networks will serve as the primary bidder in a section 363 sale under the bankruptcy code to acquire Avaya's networking business for approximately $100 million, subject to adjustments.

The sale process will be administered by the U.S. Bankruptcy Court for the Southern District of New York and governed by the U.S. bankruptcy code. Other interested parties will have the opportunity to submit bids prior to a deadline set by the bankruptcy court. If other qualified bids are submitted, an auction process will be conducted, with the agreement with Extreme set as the floor value for the auction.

Approval of a final sale to either Extreme or a rival bidder is expected to take place shortly after completion of an auction, and the transaction is expected to close by June 30, 2017, the end of Avaya's fiscal third quarter 2017, subject to regulatory approvals and other customary closing conditions.

On February 8th, Avaya reported first quarter results for the period ended December 31,2016 including revenue of $875 million, compared with $958 million a year earlier, with a net loss of $102 million, versus a net loss of $27 million in the 2016 first quarter. First quarter product revenue was $401 million, compared with $464 million a year earlier.

Extreme reported second quarter results for the period ended December 31, 2016 on February 1st including revenue of $148 million, compared with $139 million a year earlier, with a net income of $12.7 million, compared with net income of $9.0 million for the second quarter of 2016.

Avaya announced on January 19th that it was filing under chapter 11 of the U.S. bankruptcy code in the U.S. Bankruptcy Court, stating that its foreign affiliates were not included in the filing and would continue normal operations.

The company noted it had obtained a committed $725 million debtor-in-possession (DIP) financing facility underwritten by Citibank. Subject to court approval, the DIP financing, combined with cash from operations, was expected to provide sufficient liquidity during the chapter 11 cases to support continuing business operations.

Regarding the transaction, Kevin Kennedy, president and CEO of Avaya, said, "After extensive evaluation, I believe that a sale of the Networking business is the best path forward for all stakeholders… it provides a clear path for networking customers and partners and enables the company to focus on its core… Unified Communications and Contact Center solutions".

http://www.avaya.com
http://investor.extremenetworks.com/releasedetail.cfm?ReleaseID=1016337