Ericsson to acquire Nortel unit for $1.13 billion

July 26, 2009
Ericsson AB will buy the wireless-equipment unit of insolvent Nortel Networks Corp. for US$1.13 billion in cash after beating out bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC.

The auction process has been completed, Stockholm-based Ericsson said Saturday in a statement on its website. Nortel, led by Chief Executive Officer Mike Zafirovski, is selling off businesses after filing for bankruptcy protection six months ago.

The division supplies mobile-phone systems based on the code-division multiple access standard used by many North American networks. The unit also includes gear based on long-term evolution technology, supported by the two biggest US phone companies, that will power Web-equipped phones.

“It’s going to be an important technology from 2012 onward,” said Neeraj Monga, an analyst at Veritas Investment Research Co. in Toronto.

Licensing LTE technology to handset makers may be worth as much as $2.9 billion in royalties during the next 15 years, based on Nortel’s own predictions, JP Morgan Securities said last month. The standard’s future significance probably helped attract the variety of bidders, Monga said.

Research In Motion Ltd., the maker of the BlackBerry phone, also expressed interest in acquiring the Nortel business. The market for so-called smart phones like the BlackBerry, on which you can watch videos and surf the Web, grew 13 percent in the first quarter as the mobile-phone industry overall shrank, according to researcher Gartner Inc.

At least 2,500 Nortel employees will be offered positions with Ericsson, Nortel said in a separate e-mailed statement Saturday. US and Canadian court approvals will be sought at a joint hearing on July 28, and the companies will seek to complete the transaction later this year, it said.

Nortel plans to hold a similar auction for its corporate- networking business this quarter.

Source: Bloomberg

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