Ericsson makes new Riverstone bid
Riverstone Networks will have two suitors in a bankruptcy auction scheduled to begin today.
On Friday, the Cabletron Systems spinoff company announced that Swedish-based Ericsson made a $178 million bid for Riverstone’s assets, topping Lucent Technologies’ $170 million by the minimum required amount. A hearing on the bidding process, as well as a number of other motions, is scheduled for March 23.
Riverstone announced Feb. 7 it planned to sell its assets to Lucent. A few days afterwards, the Securities and Exchange Commission halted all trading on the stock because it had not filed financially accurate financial statements since it spun off in 2001 from Cabletron.
Under the Lucent proposal, shareholders would receive a little more than a $1 a share, less than a tenth of the stock’s price when it was first spun off.
Lucent was a major Riverstone customer, and investors were concerned that the proposal wasn’t an arm’s-length transaction. Dissident shareholder Charles Grimes has filed several motions to that effect, forcing a shareholder meeting that – the company announced last Tuesday – resulted in the election of the board. A shareholder move to reduce the size of the board also failed.
Grimes also objected to the bankruptcy filing itself, arguing that it basically shut out other bidders from making an attempt to buy Riverstone.
Last Friday, Riverstone’s lawyers fired back, arguing that no one would buy the company outside the bankruptcy sale. It noted that the company spent $16 million in the two months since Christmas, leaving only $18 million in cash after it pays off the bondholders.
“If permitted to continue, this dramatic, ongoing loss of cash on hand would, in a matter of a few months, impair operations and jeopardize (or more likely eliminate) the potential for any recovery for stockholders,” argued Riverstone’s attorneys. – BOB SANDERS