Avaya to buy German IP telephony vendor

U.S. telecommunications equipment maker Avaya increased its presence in Europe to the tune of about US$635 million on Tuesday, agreeing to acquire German enterprise communications vendor Tenovis GmbH & Co. KG.

The deal will strengthen Avaya's sales and service presence in Europe, especially in Germany, according to Lynn Newman, an Avaya spokeswoman. Tenovis will be integrated into Avaya, but no decision has been made on staffing levels or on the branding of Tenovis' products, she said.

Avaya will pay approximately US$370 million in cash and assume about US$265 million in debt. It will acquire Tenovis from affiliates of private equity firm Kohlberg Kravis Roberts & Co., according to a company statement.

After the companies are integrated, Avaya expects Tenovis to contribute about US$1 billion in annual revenue. The company expects the acquisition to benefit its earnings by $0.07 per share by fiscal year 2006, which will end Sept. 30, 2006. In Avaya's 2005 fiscal year, which ends Sept. 30, 2005, the deal is expected to dilute the company's earnings by US$0.08 per share, according to the statement.

Both companies play in the growing market for IP (Internet Protocol) telephony, in which voice calls are converted to data packets and sent over a carrier data network or enterprise LAN. Tenovis provides enterprise communications systems and services for midsize companies and has about 200 customers throughout Europe, the Middle East and Africa, Newman said. The company has 5,400 employees in Europe, primarily in Germany. Avaya has approximately 15,000 employees worldwide but only about 1,700 in Europe, she said. After the acquisition, Avaya expects its European revenue to grow from 12 percent to 30 percent of its worldwide business.

The acquisition is subject to standard regulatory approvals and closing conditions, and Avaya will not project when the deal will close, Newman said.

Avaya was spun off from Lucent Technologies in 2000. Frankfurt-based Tenovis was founded in 1899 as a telephone system rental business, according to a company statement.

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