New front runner in Alcatel-Lucent Enterprise sale

Back in April news broke that Alcatel-Lucent was hanging a FOR SALE sign on its Enterprise business which includes Genesys, the top contact center software vendor. A few weeks later it’s reported that potential buyers were in San Francisco to discuss a deal worth around $1 billion, and that Siemens Enterprise Communications (SEN) was the front runner.

Now more than two months later Reuters reports of a new “lead horse” to buy ALU Enterprise: Permira:

Private equity firm Permira has emerged as the frontrunner to buy a collection of businesses put up for sale by telecom gear maker Alcatel-Lucent (ALUA.PA), sources familiar with the situation told Reuters.

The crown jewel of the sale is Genesys, which sells software for the operation of call centres and video conferencing and is attractive for its high margins.

“Permira is the lead horse,” one source said. It is offering $1.3 billion and the process is expected to last another month.

Permira and Alcatel-Lucent declined to comment.

Permira is a private equity firm founded in Europe with approximately €20 billion. It has a very diverse portfolio, owning companies worldwide in the life sciences, entertainment, fashion, technology, financial, and media sectors. This is a firm that invests in Silicon Hills’ (aka Austin, TX) Freescale Semiconductor as well as iconic fashion group Hugo Boss and Valentino.

So naturally, it wants to get into the networking and telecom business as well…

This latest Reuters report also sheds some light about this sale which leads me to believe SEN is no longer a serious contender to acquire ALU Enterprise.

First, sources told Reuters that an SEN offer had been rejected because of its “complicated structure.” Plus, SEN’s 51 percent owner the Gores Group “tried unsuccessfully to bring more partners into the bid, including KKR” (another global PE firm). The logical reason for SEN’s approach would be either it didn’t have the $1 billion or it didn’t want to risk that much on its own. Even though Alec Gores doesn’t shy away from high stakes gambling, Gores Group-backed SEN appears to be quite conservative in terms of investing in its future.

Second, Alcatel-Lucent unionized workers in France are jittery about a deal and have already staged a strike. French labor laws are a valid concern here. Just this will discourage bidders that aren’t experienced in dealing with European labor and unions.

Third, sources said Alcatel-Lucent has hired high-profile Qatalyst Partners as advisers on the sale. Qatalyst is known for negotiating great deals for its clients that are mostly in the tech sector, some notable transactions: National Semiconductor (acquired by Texas Instruments for $6.5 billion), Atheros (Qualcomm, $3.6B), Kosmix (Walmart, undisclosed), Netezza (IBM, $1.9B), 3PAR (HP, $2.4B), Palm (HP, $1.4B), and LifeSize (Logitech, $405 million). If the choice is between SEN and an established private equity firm like Permira, it’s unlikely that Qatalyst will advise picking SEN as the buyer.

So how close is Permira? Will the price go higher than $1.3B? Or could there even be an IPO in the U.S.?


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