Once North America's largest telecomunication service provider Nortel Networks Corp. (NRTLQ.PK), Friday said its key subsidiary, Nortel Networks Limited, and certain of its other subsidiaries including Nortel Networks Inc., have closed the sale of its CDMA Business and LTE Access assets to Telefonaktiebolaget LM Ericsson (ERIC) for US$1.13 billion.
Toronto, Canada-based Nortel said the closing of sale is pursuant to pending court approvals in the U.S. and Canada, as well as regulatory and other customary closing conditions.
On October 30, Nortel extended the closing date of the sale to November 30, in order to allow more time to satisfy closing conditions, including regulatory approvals. Since the merger deal received all necessary regulatory approvals, Nortel announced the sale was concluded effective today.
Under the terms of the sale, Nortel will provide transitional services to Ericsson, and Ericsson will provide products and services to Nortel in support of those CDMA customers remaining with Nortel.
As per the agreement, a minimum of 2,500 Nortel employees supporting the CDMA and LTE Access business would be employed by Ericsson, Nortel said.
According to Nortel, the sale represents the first large-scale divestiture and also a milestone in Nortel's plan to preserve the value of its innovation, while maximizing value.
Commenting on the sale, Nortel's chief restructuring officer, Pavi Binning said, "As we stated following July's auction, the sale of our CDMA business and LTE Access assets to Ericsson represents a very positive prospect for our customers, our employees and for many of our other stakeholders. Our customers will benefit from having an experienced and financially strong partner supporting their CDMA and future LTE networks."
Earlier on July 25, Nortel had entered into the asset sale agreement with Ericsson, with Ericsson agreeing to purchase substantially all of Nortel's CDMA business and LTE Access assets.
On January 14 this year, Nortel had voluntarily filed for bankruptcy protection under Chapter 11 for its U.S. subsidiaries, including Nortel Networks Inc. and Nortel Networks Capital Corp.
Nortel's North American CDMA operations generated approximately US$2.0 billion in 2008. Looking ahead, research and development costs are expected to be relatively low in CDMA, compared with other technologies.
Ericsson's North American business generated US$2.7 billion of sales in 2008, mainly from GSM and WCDMA equipment and associated services. When coupled with the recently announced Sprint services agreement, the acquisition makes North America the largest region within Ericsson and encompasses some 14,000 employees.
Consummation of the sale is subject to regulatory and other customary closing conditions, and the purchase price is subject to certain post-closing adjustments.
SEB Enskilda is acting as Ericsson's sole financial advisor in the transaction.
Meanwhile, on July 21, MatlinPatterson Global Advisers LLC, a private equity firm focused on distressed control investments, had submitted a proposal to buy substantially all of Nortel Network's CDMA and LTE Access assets for US$725 million. The offer topped an earlier bid for assets by Nokia Siemens Networks B.V. by $75 million.
Alternative bids for Nortel's core wireless assets were part of the U.S. bankruptcy court's process to see if the assets could fetch a higher price before the court approves the sale.
In an earlier development, BlackBerry maker Research in Motion Ltd. (RIMM, RIM.TO) said that it was prepared to bid $1.1 billion for Nortel's wireless assets, plus other unspecified assets, but was blocked from doing so. The company said it was told that it could be qualified only if it promised not to submit offers for other Nortel assets for a period of one year. Despite repeated efforts, Nortel, its advisors and its court-appointed monitor had rejected RIM's repeated attempts to engage in meaningful discussions.
On July 20, Nortel had entered into an agreement to sell substantially all its assets in another of its units, Enterprise Solutions Business, to Avaya Inc. for US$475 million. The unit makes communications gear for governments and large corporations. The deal also includes Norton's stake in Nortel Government Solutions Inc. and DiamondWare, Ltd. and subject to purchase price adjustments under certain circumstances.
In October 26, Nortel's subsidiaries - Nortel Networks Limited and Nortel Networks Inc., entered into an agreement with Hitachi, Ltd. for selling assets related to development of next generation packet core network components, excluding legacy packet core components for Nortel's GSM and UMTS businesses components for US$10 million.
The assets under sale included software to support the transfer of data over existing wireless networks and wireless communications technology, including relevant non-patent intellectual property or IP, equipment and other related tangible assets, as well as a non-exclusive license of certain relevant patents and other IP.
The transaction was subject to approval by the U.S. Bankruptcy District Court of Delaware and the Ontario Superior Court of Justice and regulatory conditions. The sale was expected to close in 2009. However, the company extended the closing date due to a delay in receiving regulatory approvals.
NRTLQ.PK is currently trading at $0.0490, down $0.0015 or 2.97% on a volume of 2.17 million shares.
ERIC is currently trading at $10.60, up $0.20 or 1.92% on a volume of 2.71 million shares.
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