Ciena's final cash and debt offer was worth US$769 million, about US$248 million more than it initially bid in October.
The Maryland-based company emerged on top after a three-day auction in New York that began Friday. It beat out the much larger telecom equipment maker Nokia Siemens.
Gary Smith, Ciena's president and chief executive officer, said the Nortel acquisition would accelerate the company's growth strategy.
"By combining these assets with Ciena's existing resources, our collective customer base will be able to rely on one of the largest and most innovative companies strategically focused on converged Ethernet networking," Mr. Smith added in a statement.
Ciena will pay US$530 million in cash plus US$239-million principal amount of convertible notes due June 2017 to acquire the Nortel unit.
Nortel said it was pleased with the deal, particularly with Ciena's commitment to retaining most of its employees.
"Ciena's commitment to the future of our product platforms, customers and employees represents an exceptionally positive outcome to a challenging journey that started over a year ago," said Philippe Morin, president of Nortel's metro Ethernet networks division.
"Uniting our two optical businesses is a game changing event for the optical industry, creating a leader that has the end-to-end portfolio, industry innovation leadership, and significant global customer base to succeed in today's highly competitive market," Morin said.
The sale is subject to court approvals on either side of the border which Nortel will seek at a joint hearing Dec. 2.
Nortel said it hopes to close the sale in the first quarter of 2010.
The former Canadian technology heavyweight, has been selling off its divisions after filing for creditor protection in January.
So far, it has sold off several pieces of the business, including its next-generation packet core network component assets to Japanese electronics manufacturer Hitachi Ltd. for US$10 million, and its enterprise solutions division to New Jersey-based Avaya for $900 million.
It has yet to sell its assets related to GSM-R technology.
-By Diana Mehta, The Canadian Press
