Nortel Networks Corp. has reached an agreement to sell the bulk of its Enterprise Solutions unit to Avaya Inc. for $475 million US.
Nortel described the deal Monday as a "stalking horse" agreement, suggesting that the company hopes it will prompt other potential bidders to make a better offer.
The Enterprise Solutions unit supplies phone systems and other communications equipment to businesses and large organizations around the world.
Avaya, with headquarters in Basking Ridge, N.J., has been a rival of Nortel in that business and has long been considered a leading contender to buy the unit from the Toronto-based company.
Nortel has been operating under court protection from its creditors since January. It had originally intended to reorganize as a smaller independent business, but more recently has been selling its major assets.
"We continue to be fully focused on running our operations and continuing to serve our customers while actively engaged in the sale of our businesses," Nortel CEO Mike Zafirovski said in a release.
"We have determined that the sale of our businesses maximizes value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible," he said. "This represents the best path forward, and we are advancing in our discussions with interested parties for our other businesses."
Nortel said the agreement will be filed with a U.S. bankruptcy court in Delaware, along with a motion to establish bidding procedures for an auction that allows other bidders to submit better offers. A similar motion will be filed with the Ontario Superior Court.
Any final deal will require court approval.