TORONTO - LM Ericsson's US$1.13-billion deal to buy key assets of insolvent Nortel Networks won court approval in Canada and the United States on Tuesday despite growing objections to the sale.
Both judges said they were satisfied that the Nortel assets were being sold at a fair price, that no bidder was unfairly shut out of the auction and that both Nortel and its creditors will benefit.
"For all of those reasons, I am very enthusiastically prepared to enter the sale order in this matter," U.S. Judge Kevin Gross said via videolink to a Toronto court.
It's rare that a bankruptcy judge is enthusiastic, but Gross said he was "very enthusiastic" about the sale.
But the rulings in Toronto and Delaware may not be the final word in the tumultuous saga that has seen the former Canadian technology darling fall from atop the country's business world to be sold off in pieces.
Before the decisions were handed down, opposition to the deal sprang from a number of groups who say the company is too valuable to fall into foreign hands, including federal opposition parties, the Ontario government and BlackBerry maker Research In Motion (TSX:RIM), which failed in its own bid for the assets.
Both Liberal Leader Michael Ignatieff and NDP Leader Jack Layton asked the federal government to block the sale of insolvent Nortel's cutting-edge technology, appealing to the other parties in Parliament to convene an emergency session of the Commons industry committee to consider the sale.
They have been putting pressure on Ottawa, in particular Industry Minister Tony Clement, to review the deal and act to protect Nortel's assets as a national treasure.
"This intellectual property that Nortel had, that was built up of taxpayers' money, is just so important and so valuable for the future of wireless technology around the world," Ignatieff said Tuesday.
The NDP calculated that the net benefit Nortel received for one of their profitable years was $400 million, mainly from the research and development tax credit, and that over the last decade, Nortel has spent over $30 billion on R&D.
"We're fortunate to have some real success stories in this country and our government should be working to help success stories to succeed," said Layton.
Nortel lawyers disputed claims the sale would siphon off critical Canadian technological know-how and hurt national security.
About 600 patents are being sold to Ericsson, but they don't involve "long-term evolution" or LTE, Nortel lawyer Derrick Tay told the court.
LTE is a fourth-generation wireless technology that promises to be much faster and allow cellphone operators to stream video and other advanced services to their devices.
The LTE patents held by Nortel are being licensed -- not sold -- to Ericsson, meaning arguments to block the sale on grounds of national interest are baseless, Tay said.
The remaining patents, including the LTE patents, will be sold and interested parties will be able to bid on them under a separate court-approved process, Tay added outside court.
"Yes, that's coming. It's not here yet," he said. "So people are fighting a fight that's not even in existence yet."
RIM, which complained it had been unfairly blocked from the auction of the assets, has approached Nortel about buying the LTE patents, said a source familiar with the deal".
RIM would only confirm Tuesday that it "remains interested in acquiring certain Nortel assets and remains ready to engage."
Tay slammed politicians and other "parties" who oppose the Ericsson deal for waging their battles through the press rather than in court.
"If we send a message -- how erroneously it may be -- that somehow politicians can, whenever they like, interfere in the political process, we are fundamentally affecting the integrity of a Canadian legal system and the ability and willingness of other parties in other parts of the world to deal with Canadian debtors," he said outside court.
RIM said it had no standing before the courts that would allow it to object to the sale. Now that the courts have ruled on the deal, it is now "timely" for Clement to review the sale, it said in a release.
Clement said Tuesday it was premature to say whether he will intervene.
"We have laws in this country, we will apply those laws fairly," he said in Ottawa.
"We welcome foreign investment, we continue to do so. We continue to obtain foreign investment, that is a good thing for our economy, but we also expect foreign investors to abide by the laws of the land."
He added, however, that Ottawa welcomes comment from interested parties, including RIM, which talked about making an offer for the assets but wasn't part of the auction that saw Ericsson trump a rival bid from Nokia Siemens.
RIM's informal US$1.1-billion offer was shut out when it objected to Nortel's bidding process, though it promised to continue its fight to buy certain assets and urged the federal government to "get involved to protect vital Canadian interests."
The judges agreed Tuesday to designate Nokia Siemens' $1.032 billion offer as the alternate bid for the wireless assets. If the Ericsson deal doesn't go through, Nortel has the authority to sell the assets to the Finnish company.
Export Development Canada has agreed to back Nokia's bid with a US$300-million loan commitment.
Nortel will have to return to court for a ruling on how the proceeds of the sale should be divvied up, the judges ruled.
Ontario Justice Geoffrey Morawetz noted that the court-appointed monitor concluded that last Friday's auction of the assets was "vigorous" and resulted in a deal that was far above the US$650-million stalking horse bid.
Toronto-based Nortel was once North America's biggest maker of telephone gear, but was battered by the recession and a downturn in its market that derailed a restructuring effort begun by Zafirovski when he was hired away from Motorola Inc. (NYSE:MOT) four years ago.
Since its peak a decade ago, Nortel's workforce has shrunk from about 96,000 to 25,000 and the company lost tens of billions of dollars.
Besides its telecom market woes, the company was also dragged down by an accounting scandal that nearly wiped out its stock price and led to criminal fraud charges against its former CEO and other executives.
