Speculation that the telecom equipment maker Avaya could be a buyout target for a private equity firm or a competitor boosted its shares Tuesday.
Avaya (nyse: AV ) shares jumped $2.11, or 15.4%, to $15.78, on indications the company is in deal talks. The company first raised hopes that it could be in preliminary talks for a sale when it postponed an analyst day scheduled for May 31. The company's also drawn speculation due to its attractive fundamentals, as it has high cash flow and low debt.
As telecom equipment makers look to consolidate, other candidates for purchase include Avaya's larger competitors. In the Internet-based phone service niche, the company competes with tech giants like Cisco Systems and Microsoft.
Another larger competitor is network equipment provider Nortel Networks (nyse: NT ). The Wall Street Journal reported Tuesday that people familiar with the matter say that Nortel is interested in acquiring Avaya. Avaya did not return a phone call seeking comment.
The report also said that the company is in talks with private-equity firm Silver Lake Partners about a leveraged buyout plan.
In addition to its strong fundamentals, Avaya could be drawing attention because of some of its assets. Standard & Poor's analyst Ari Bensinger said the company's private branch exchange and services support businesses could be catching the attention of potential bidders.
Nortel was up 13 cents, or 0.5%, to $25.92, on Tuesday.
The Avaya speculation was just part of a batch of acquisition news that helped push the markets higher Tuesday. Investors have drawn some of their confidence that stocks are still reasonably priced from the massive appetite of public companies and private firms for U.S. equities. (See:Good Deals.)
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