Buyout firms Silver Lake Partners and TPG Capital are considering a sale of telecommunications equipment company Avaya that could value it at between US$6-$10 billion, including debt, according to people familiar with the matter.
The move is part of a wider effort to deal with Avaya's US$6 billion debt burden, as it transitions from a legacy hardware business to a software and services company helping corporate clients with their communication needs.
Avaya is working with investment bank Goldman Sachs to explore the possibility of selling itself or some of its major businesses, according to sources.
Avaya's cloud, contact centre, wireless local area network and fabric switches businesses are among those that could attract potential buyers, some of the people added.
There is no certainty that any transaction will occur, the people said, asking not to be identified because the deliberations are confidential.
An Avaya spokeswoman declined to comment, but pointed to the comments of its CEO Kevin Kennedy on the company's recent earnings call, on which he said that "Goldman Sachs is helping Avaya evaluate expressions of interest that have been received relative to specific assets, as well as explore other potential strategic opportunities."
Silver Lake and TPG declined to comment.
Based in Santa Clara, California, Avaya provides software, hardware, professional support and cloud services to businesses for their telecommunications needs. Last year, it had over 300,000 customers, including 83 percent of the Fortune 500 companies.
Avaya has been generating strong cash flow, with adjusted earnings before interest, taxes, depreciation and amortisation last year reaching US$900 million. However, its interest expense of more than US$400 million every year has been pushing it consistently into loss.
Avaya also faces a US$600 million debt maturity that is due in October 2017, for which it needs to raise cash.
As a result, in addition to hiring Goldman Sachs, Avaya also announced on Monday it had hired investment banking boutique Centerview Partners to advise on how it could shore up its capital structure.
Avaya will need to constantly reinvest in new products and platforms to maintain its market position against Cisco, its much larger and better capitalised primary competitor, as well as smaller cloud-based peers, credit ratings agency Moody's Investors Service said earlier this year.
Reporting by Liana B Baker in San Francisco and Greg Roumeliotis in New York; Editing by Andrew Hay
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