RIM shut out of Nortel asset auction
- 22 July, 2009 07:46
Research in Motion is calling on the Canadian government to review the auction of Nortel Network's assets claiming it was shut out of bidding for the troubled network hardware maker's wireless properties.
Jim Balsillie, co-CEO of the BlackBerry maker, said his company was prepared to put down as much as US$1.1 billion for Nortel's code division multiple access (CDMA) and Long Term Evolution (LTE) businesses but restrictive conditions levelled on RIM's bid is preventing the company from keeping Nortel's assets in Canadian hands.
On June 19, Nokia Siemens Networks offered US$650 million for Nortel's carrier wireless assets, but comparing this to RIM's bid is not an "apples to apples" comparison, said Mark Tauschek, lead analyst with London, Ont.-based Info-Tech Research Group.
He was referring to the statement in a Research in Motion press release that the Waterloo, Ont. company is seeking, in addition to Nortel's CDMA and LTE business, "certain other Nortel assets."
It was not immediately clear what those "certain other" assets are.
"They are probably trying to buy some intellectual property in conjunction with it," Tauschek said.
Another Canada analyst agreed.
"I think really the main driver there for RIM is for the intellectual property rights rather than the core of the business," said Ronald Gruia, the Toronto-based program leader for enterprise telecom at Frost & Sullivan. "Companies are hardly flocking to the base station market."
RIM believes its offer would result in an "extremely attractive price" for Nortel creditors and value substantially in excess of the stalking horse bid made by Nokia Siemens Networks, a RIM statement issued late Monday night said.
"It's encouraging a technology leader in Canada is interested in investing" in Nortel, said Brownlee Thomas, Montreal-based principal analyst at Forrester Research Inc. "That promises hope for the Canadian employees of Nortel."
Despite its efforts, "RIM has found itself blocked at every turn," Balsillie stated in the press release.
A RIM spokesperson said its executives were travelling Tuesday and not available to comment.
An Industry Canada spokesperson said his department is following the discussions closely and e-mailed a statement from the department attributed to Tony Clement, the federal industry minister.
"As Nortel is in bankruptcy protection, the Government of Canada does not have a say how the Judge rules on any proposed sale of Nortel assets," Clement said in the written statement.
In its statement, RIM said it sought to be considered as a qualified bidder in the auction for Nortel's wireless business but was told it would only qualify if it pledged not to submit offers for other Nortel assets for a year.
"In seeking to impose this condition, Nortel and its advisers were fully aware of RIM's desire to purchase other Nortel assets as part of a solution to retain key portions of Nortel's business under Canadian ownership" the statement said.
"Despite repeated efforts, Nortel, its advisers and its court-appointed monitor have rejected RIM's repeated attempts in meaningful discussions."
Nortel spokesperson Ryan Hill said RIM's bid was rejected because RIM refused to sign a confidentiality agreement that Nokia Siemens Networks was willing to sign as a condition for have its bid accepted.
RIM also has concerns about national security, but was not specific.
"RIM believes that the loss of Canadian ownership of Nortel's CDMA and Long Term Evolution Access businesses may significantly, adversely affect national interests, with potential national security implications, and that the Government of Canada should review the situation closely," the company stated in a press release.
Hill said Nortel would not comment on that claim.
Gruia suspects RIM was talking about provisions in the Investment Canada Act, which requires Industry Canada to review the bids by non-Canadians to acquire Canadian firms meeting certain criteria. In the cases of members of the World Trade Organization, acquisitions exceeding $312 million would be reviewed.
It was not clear, however, how an acquisition by Nokia Siemens Networks of Nortel's CDMA and LTE business would compromise national security.
"I think that's a little bit of nonsense from Balsillie," Tauschek said, adding LTE is a standard and CDMA is proprietary to Qualcomm.
"There are certainly really no secrets around the technology."
A Nokia Siemens Networks spokesperson would not comment on RIM's claims that their acquisition could have "national security" implications.
"We do believe that our offer is in the best interest of employees and customers in Canada," said Chantal Boeckman, communications manager at Nokia Siemens Networks.
"Time is of the essence for these assets," she said. "We are in a position to close the deal."
Nokia Siemens Networks, Avaya and RIM are not the only parties interested in parts or all of Nortel.
On Monday, Nortel announced that it has entered a "stalking horse" agreement in which Avaya Inc. of Basking Ridge, N.J. will buy its enterprise units for US$475 million.
The move comes about a month after Nokia Siemens Networks entered into a similar agreement to buy Nortel's carrier wireless assets for US$650 million.
A group led by former Nortel president Robert Ferchat is hoping to raise $1 billion to keep the company in Canadian hands and is asking the government to delay the sale of its assets.
New York-based private equity firm MatlinPatterson Global Advisors is also backing a group led by former Nortel president Dion Joannou's bid for Nortel.
In January, this year Nortel applied for court approval for creditor protection in the Canada, the U.S. and Europe, following years of financial troubles.
RIM's statement Monday night pointed out that the Nokia Siemens bid is propped up by a multi-million dollar loan from the government.
"RIM is extremely disappointed that Nortel's world leading technology, the development of which has been funded in part by Canadian taxpayers, seems destined to leave Canada and that Canada's own Export Development Corporation is preparing to help by lending $300 million to another bidder," the statement quoted Balsillie as saying.
(With files from Jeff Jedras)