Sweden's Ericsson has won the heated international race for the new generation of wireless networks assets owned by Nortel Networks Corp. with a $1.13-billion (U.S.) bid that trumped two competing international offers and a last ditch overture from Canada's Research In Motion Ltd.
According to sources familiar with a court supervised auction that began in the New York offices of Nortel's U.S law firm yesterday, Ericsson tabled the best and final offer late Friday night.
The winning bid by the world's largest maker of wireless network gear bested competing offers from Nokia Siemens Networks and New York private equity firm MatlinPatterson Global Advisors LLC. BlackBerry maker Research In Motion Ltd. had also backed an effort to acquire the wireless unit, but sources said Ericsson's lucrative offer leaves little room for the Waterloo based company to make a competing play
People familiar with the auction process said Ericsson lead the auction from the beginning with a $730-million bid and neither rival was able to top its bidding through the day.
Based in Sweden, Ericsson is more than 130 years old and it is one of the world's largest telecommunications equipment companies. Ericsson has been eager to enter the North American market, where it has been largely shut out of the wireless business by Nortel.
In February, Ericsson won a major contract from U.S. phone giant Verizon that selected the Swedish company over competing bids from Nortel and Nokia Siemens for the next generation of wireless networks.
Verizon had been a major Nortel customer for wireless systems, but shied away from the Canadian company for the new venture because it was operating under court protection for creditors.
“The [Verizon] deal itself was a huge milestone because for the last few years that part of the market was not available to us,” Arun Bhikshesvaran, a senior vice-president at Ericsson told journalists earlier this year.
The auction was upstaged this week by a maverick proposal from RIM. The company had not formally joined the auction, alleging Nortel blocked it from bidding. But the BlackBerry maker was believed to be considering backing the bid from MatlinPatterson. The fund had tabled a $725-million (U.S.) offer.
A $650-million offer had been made by Nokia Siemens Networks BV, a joint venture between Finland's Nokia Corp., one of the world's largest cellphone makers, and Germany's Siemens AG.
The assets are coveted because they include Nortel's work on the next generation of wireless technology, known as Long Term Evolution or LTE, which will make downloading of everything from videos to movies much faster. Nortel was arguably the leader in developing LTE technology.
In a statement issued late Friday night, Nortel said that Ericsson has agreed to offer jobs to 2,500 Nortel employees in the wireless division.
The bid is subject to court approvals in the U.S. and Canada, where Nortel has sought bankruptcy protection from its creditors.
In a statement, Nortel President and Chief Executive Officer, Mike Zafirovski said the proposed sale to Ericsson" represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders."
Carl-Henric Svanberg, President and CEO of Ericsson said: “The agreement between Nortel and Ericsson brings together leading-edge wireless innovation from two of the world's top telecommunications suppliers. We at Ericsson look forward to integrating Nortel's products and talented employees into our business and realizing the full potential of our combined strengths."
