Canadian communications equipment giant
(NYSE:NT) is in advanced negotiations to acquire
, TheMarker.com has learned.
LightScape is a fully-owned subsidiary of
(Nasdaq:ECIL). LightScape's value for the deal is apparently somewhere between $600 million to $800 million.
ECI incorporated LightScape as an independent company this year after resolving to demerge into five separate companies in order to create value for shareholders, led by
(Nasdaq:KOR). LightScape, which develops optical solutions, has 700 workers and is headed by CEO Eran Dariel.
TheMarker.com also learned that a team of 30 Nortel executives visited ECI's plant in Petah Tikvah last week to carry out preliminary due-diligence for LightScape. Dariel is currently visiting Nortel to establish the terms of the deal.
LightScape has developed an
protocol for use by European communications providers. The company recently came out with a SONET version for the American market. It has reportedly already sold one system to an American phone company.
LightScape expects to generate growth both from its futuristic XDM and from its traditional SDH products. For 2000 LightScape reported sales of $260 million. Dariel recently said that he expects 40% growth in 2001, which means that the sales could rise to $350 million.
During 2000 LightScape reported deals with a number of leading communications providers, including
, and Mannesmann, which was taken over by
(NYSE, LSE:VOD). Nortel itself also placed several major orders from LightScape over the year.
Goldman Sachs once appraised LightScape at as much as $3 billion. But the crash of tech stocks has slammed optical companies such as
(Nasdaq:JDSU, TSE:JDU), dragging down LightScape's value.
Two months ago US Bancorp Piper Jaffray estimated that LightScape was worth about $900 million. Meanwhile, the market cap of the whole ECI group has shrunk to $750 million.
Nortel, Koor's partner in
, is considered to be a pioneer in optical communications. It was the first company to develop equipment to transfer communications over optic networks. But Nortel itself issued acute profit warnings at the end of 2000 and in early 2001. Its shares have plunged to $16, pricing the company at only $53 billion from its peak value of almost $300 billion.