Industrial conglomerate Siemens AG plans to spin off its call center equipment maker Siemens Enterprise Communications GmbH & Co. KG (SEN) unit into a joint venture with Los Anglels-based private equity firm The Gores Group. SEN was created from its parent Siemens AG two years back with the intention of being divested.

A joint venture is being formed  between Gores Group and Siemens in which SEN will be combined with two other Gores portfolio companies, router and switchmaker Enterasys Networks Inc. and call center software maker SER Solutions Inc. 

At the operational level, the business will be driven by Gores, which will own a 51-per cent stake in this joint venture. The new venture will receive euro250 million ($550 million) from Gores and Siemens AG, allowing the new business to start debt-free and a financial corpus for investment in R&D and potentially even strategic acquisitions.

By divesting through the private equity route as joint venture rather than a merger with another organisation, both companies will avoid the problems of organisational integration, with its potential effects on service and support. By not merging with a competitor, the new SEN and its customers will avoid the uncertainty and potential costs of the need to rationalise product lines.

 The joint venture will be entitled to continue using the Siemens brand. Key patents and licenses will be transferred to the joint venture.

"Siemens Enterprise Communications will continue to be a preferred supplier to Siemens, to use the Siemens One sales network and to cooperate on customer projects with Siemens," the German conglomerate said ina statement.

Production facilities in Leipzig, Germany, and Curitiba, Brazil, and Thessaloniki, Greece, will be transferred to the joint venture. Production at the Leipzig facility is guaranteed by contractual agreements until 2011. Curitiba will be an important production facility for the joint venture. For Thessaloniki different options are being evaluated.

''We have been looking for an opportunity to expand our presence in the enterprise networking and communications space and this partnership with Siemens provides the perfect fit,'' noted Alec Gores, founder and chairman of Gores. Siemens will retain a stake of 49 per cent.

"We are continuing to intensify the focus of our portfolio on the three sectors, which are energy, industry and healthcare," said Joe Kaeser, Siemens CFO. "In Gores, we have found an extremely experienced technology and telecommunications partner, who strengthens the business with the contribution of the two assets Enterasys and SER Solutions.

The deal of the joint venture is expected to be closed at the end of Siemens fiscal year 2008, pending regulatory approval.

Gores, which is focused to grow businesses, has extensive management expertise in the technology and telecommunications area and has rapidly restructured businesses undergoing fundamental structural changes and established them as successful independent companies or successfully consolidated them with other companies in its portfolio. Gores has an extensive expertise in Europe as well, where they made several investments in the past few years.

Gores and Siemens have agreed that Siemens Enterprise Communications will continue to offer its OpenPath migration strategies for existing product families in order to ensure a smooth transition to the new unified communications solutions. Support and upgrades for Siemens Enterprise Communications products, especially HiPath 3000 and HiPath 4000, are to be continued for the long term.