Another of the world's telecommunications giants has entered what has suddenly become a pitched global battle for the spoils of Nortel Networks Corp. NT-T
Sweden's Ericsson has tabled a $730-million (U.S.) bid for Nortel's wireless network division, the richest formal offer yet for a coveted asset that has sparked a three-way bidding war.
Ericsson officially joined the auction for the Nortel division by submitting a bid Tuesday, according to people familiar with a court-supervised bidding process.
The Ericsson bid bested bids by two competitors and appears to weaken a maverick pitch by the only Canadian suitor, Research In Motion Ltd.
A spokesperson for Ericsson could not be reached.
They've missed the boat.
Although people familiar with RIM's overture said the Waterloo-based company is pursuing a number of options to mount a competing offer, sources familiar with the auction said its chances of success are limited because it has failed to observe rules set by bankruptcy courts in Canada and the United States.
The courts set a Tuesday deadline for bids and bankruptcy courts in Canada and the United States will oversee an auction on Friday.
“They've missed the boat,” one person familiar with the auction said of RIM's attempt.
Once a Canadian success story, Nortel sought protection from its creditors in January and the bulk of its assets are being sold in a court-supervised process.
The wireless division has been Nortel's most profitable operation because it provides the gear that powers wireless phone services across much of North America. The division also includes Nortel's work on the next generation of wireless technology called Long Term Evolution, or LTE. Read: What's at stake
That technology is expected to increase downloading speeds ten-fold and allow cellphones to handle more services, such as interactive television, video blogging and advanced gaming. Telecommunication companies are racing to have the first new system in place by next year.
— KIRILL KUDRYAVTSEV/AFP/Getty Images
Ericsson is among those developing new generation technology and last February it won a major LTE contract from U.S. phone company Verizon. Verizon selected Ericsson over several rival bids including one from Nokia Siemens Networks B.V., a joint venture between Finland's Nokia Corp., one of the world's largest cellphone makers, and Germany's Siemens AG, a major telecommunications equipment manufacturer.
Nokia Siemens hit back in June with a $650-million bid for the Nortel wireless division. Analysts expect Nokia Siemens to raise its bid now that Ericsson has joined the fray. Read: Nokia vows to keep Nortel on cutting edge
Nokia Siemens spokeswoman Chantal Boeckman said, “We're assessing on our end, but feel that our bid is in the best interest of Nortel's employees and customers and Canada … We're also ready to move quickly in closing and executing with this deal, which is important for these assets.”
A third bid, worth $725-million, has come from New York-based MatlinPatterson Global Advisers LLC, a private equity fund that is also a major Nortel creditor. MatlinPatterson has been involved in several other telecommunications companies and it is backed by three former Nortel executives. A MatlinPatterson spokesman declined comment yesterday.
Nortel had been in discussions with RIM regarding a related transaction but those discussions are currently on hold.
RIM has disrupted the auction process by dangling a $1.1-billion proposal to acquire the wireless unit. The company declined to submit a formal bid after it alleged that demands from Nortel officials were too onerous. RIM is seeking to reopen the bidding on more favourable terms and it has asked Ottawa to intervene. Read: Why Ottawa turned its back on Nortel
The company declined to discuss its plans yesterday, but people familiar with RIM said it is actively pursuing a number of options.
Nortel issued a statement last night defending its actions and vowing to go ahead with the auction.
“Nortel had been in discussions with RIM regarding a related transaction but those discussions are currently on hold,” the company said. It added that all players in the auction process, including creditors and the court-appointed monitor, “have reviewed the circumstances related to RIM and have concluded that all bidders must comply with the bidding rules in order to maintain the integrity of the court-approved process.”
We have to make sure the process isn't hijacked and the bidders walk away.
RIM's unusual public pressure have put Nortel's board of directors and the courts in a difficult position. If they allow the Waterloo Ont.-based company to delay the sale, the court's ability to manage what is now a robust bidding war between powerful global competitors could be undermined. Any delay could also erode the value of a division that has been beset with morale problems and staff departures because of Nortel's financial woes.
“We have to make sure the process isn't hijacked and the bidders walk away,” said one person close to Nortel.
Sources said a court-appointed monitor has not been in contact with RIM officials since Saturday when they requested a meeting to discuss a potential bid. A meeting was set for early Monday morning, but sources said RIM officials never showed up.
With a report from Boyd Erman
