Let’s Make A Deal: Lucent Sells Off NVG

Even as Lucent Technologies Inc. dodged rumors late last summer that it was planning to sell off its New Ventures Group (NVG), the telecommunications giant had already begun stealthily seeking out potential buyers for the NVG portfolio.

After five months of quiet negotiations, Lucent announced last week that it had sold off 80% of its ownership stake in NVG to London-based investment management firm Coller Capital. Under the terms of the deal, the two companies have created an independent venture capital partnership called New Venture Partners II LP (NVP II), which will own and manage the former Lucent NVG portfolio.

Furthermore, Lucent will retain a 20% equity stake in the partnership, which will allow it to reap some return on its investments down the line.

“We will still have an opportunity to work with the organization on future investments, if we choose to, but we will not have any active part in managing the portfolio anymore,” explained Lucent spokesman Frank Briamonte.

Additionally, it isn’t likely that Lucent will contribute any additional capital to the partnership going forward, unless the investment is particularly appealing, he said.

While the financial terms of the deal have not been disclosed, a source familiar with the situation said Coller picked up the NVG portfolio at a “deep discount to the value [Lucent] contributed to it.”

“It was an amazing bargain,” the source said.

Prior published reports have indicated that Lucent could have fetched as much as $100 million for both NVG and Lucent Venture Partners. The amount of Lucent’s total NVG commitments were not available at press time.

Nonetheless, it comes as no surprise that Lucent sold the NVG portfolio for whatever amount it could get.

It doesn’t appear that there were too many bidders. When Lucent decided to sell NVG in late July, it approached a few, hand-picked potential buyers rather than staging a public auction. In fact, the company never announced publicly until last week that it had any intent to sell the portfolio.

By late September, a few firms had begun due diligence, but Lucent, perhaps anxious to unload yet another non-core asset, quickly inked an exclusivity agreement with Coller in October, according to a source familiar with the deal.

Now the dozen or so NVG staff members that have survived Lucent’s massive restructuring and cost-cutting efforts during the past year will make the move over to the new partnership and continue to manage the portfolio. That group, however, has dwindled significantly from the 40-person staff the four-year-old NVG once boasted. None of the partners were laid off as a result of the sale, Briamonte said.

That NVG’s core staff has remained on board is a big plus for Coller, the source said.

“That they are deferring their carried interest and staying committed is a vote of confidence,” he said. “If they wanted to quit now, they could have done so.”

The portfolio, which consists of 27 firms spun out of Bell Labs, also offers a host of valuable technologies, as well as a roster of mature companies that are already publicly traded or will likely be targets for a strategic sale in the near future. Both of those assets made it an attractive deal for Coller, the source said.

It also enables NVG’s portfolio managers to focus on their investments without getting caught up in the internal politics and concerns that have resulted from Lucent’s restructuring efforts, a source within the group said.

The same goes for the portfolio companies, which now have the flexibility to maintain a customer relationship with Lucent while being able to approach its competitors without having to couch NVG’s relationship with their parent company.

As for Lucent Venture Partners, no sale is in the works yet. However, Lucent has decided that for the near future, its venture arm will not be making any new investments, and will focus on its existing portfolio, Briamonte said.