Nortel to Acquire Architel for US$395 Million

Nortel Networks announced plans yesterday to acquire Architel Systems, which makes services software for telecommunications providers, in an all-stock deal valued at $US395 million.

Nortel said the acquisition will help to grow its Preside portfolio, which includes software that allows applications such as virtual private networking and voice-over-DSL (digital subscriber line) to work with a wide range of network types.

Architel's software will become a key component of Preside, and will help service providers to provision and activate new services for individual customers in a matter of minutes instead of the weeks or months it takes in many networks, according to Nortel.

The Brampton, Ontario-based networking company also said that the acquisition complements its acquisition of customer-care software maker Clarify Inc., which it announced plans to buy in October for $US2.1 billion.

The transaction is expected to close early in the third quarter of this year, subject to customary regulatory approvals, court approval and approval by Architel's shareholders, Nortel said in the statement.

Nortel will exchange .21 of a common share for each Architel share, resulting in Nortel issuing about 3.63 million common shares on a fully-diluted basis, Nortel said in a statement. However, if Nortel's shares are worth less than $83.81 when the deal closes, Nortel will pay $US17.60 in common shares for each share of Architel. If the value of Nortel's shares is above $US125.71, Nortel will pay $26.40 in Nortel shares for each Architel share, Nortel said.

Nortel's shares on the New York Stock Exchange were trading at $US104.69 late this afternoon, down $4.06 from yesterday's close. On the Nasdaq stock market, Architel's shares were trading at $US20.25, up $US4.50.

With headquarters in Toronto, Architel was founded in 1984 and has about 400 employees. Its customers in the Americas, Europe and Asia include Cable & Wireless, MCI WorldCom, British Telecommunications and GTE.

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