Avaya agrees to $8.2b takeover by equity groups

US-based IP telephony giant Avaya has agreed to be acquired by private equity companies TPG Capital Group and Silver Lake Partners in a deal worth $8.2 billion to shareholders.

The private equity partners will pay $17.50 a share for Avaya stock, which had closed at $13.67 on the last day of trading before a bid approach was signaled.

The deal is expected to be completed in the autumn of 2007.

Research company Ovum said the deal for Avaya 'is a vote of confidence in the company and the IP telephony business.'

'That is because private equity typically is looking for businesses with reliable cash flows it thinks can be improved quickly and substantially,' Ovum analyst David Molony said, adding that the new investors may have Cisco-scale margins of 65% in mind.

Ovum further said until now, telecoms equipment vendors had been left to sort out their own financial futures.

Nortel Networks and Motorola have survived by drastically slimming down, but others have opted for mergers, Ovum said, citing Alcatel-Lucent, and Nokia-Siemens.

Avaya is different from these merged vendors in that it is not encumbered by the need to fund infrastructure businesses, Ovum said.

Whether that can be brought to market independently is really a question now for the new owners to consider, Ovum said.