Nortel sheds optical assets

Nortel Networks has agreed to sell assets from its optical components business to the UK's Bookham Technology for approximately $US108 million, the Canadian network equipment maker said this week.

The sale should help Nortel in its bid to regain profitability and also ensures it will have a continued supply of optical components with which to build products for its customers, the company said in a statement. The deal includes a three-year supply agreement under which Nortel will buy components from Bookham worth at least $US120 million over the first 18 months.

The sale includes Nortel's transmitter and receiver business located in Paignton (UK), Harlow (UK) and Ottawa (Canada), and its pump laser and amplifiers business located in Paignton, Zurich and Poughkeepsie (New York). The assets to be sold include patents, trademarks and other intellectual property, Nortel said.

Around 1,000 employees will have the option to stay on at Bookham "after redundancies are addressed", Nortel said in the statement. The company couldn't immediately be reached for clarification. Existing customer contracts will be assumed by Bookham, based in Abingdon, Oxfordshire, which designs and manufactures optical components.

The deal is expected to close in the fourth quarter of 2002 pending certain European and US regulatory approvals, as well as a vote by the shareholders of Bookham.

Nortel made the sale in exchange for 61 million Bookham common shares, 9 million warrants with a strike price of one-third of a cent and debt of $US50 million. Bookham Technology will also pay Nortel a $US10 million cash reimbursement for related restructuring expenses.

The transaction is an "important step" in Nortel's path to profitability and its strategy to provide high-performance, cost-effective optical network systems for its customers, Brian McFadden, president of Nortel's optical networks group, said in the statement.