TORONTO -
Ottawa will be reviewing the sale of Nortel Networks' enterprise division to U.S. telecom giant Avaya Inc. to see if the deal will bring enough economic benefit to Canada.
Speaking to a group of investors Thursday Industry Minister Tony Clement said Avaya's proposed deal will be subjected to the "net-benefit-to-Canada" test under the Industry Canada Act, which is conducted to ensure the transaction is in the country's best interests.
Last week Nortel announced it would sell the enterprise division to New Jersey-based Avaya for US$900 million. The unit makes telecom equipment used by companies, governments and other big customers.
Despite calling Nortel a "thorny issue," Clement said the review will be fair and follow standard procedures for all reviews carried out when a proposed foreign investment exceeds the book investment threshold of $312 million, as is the case with Avaya.
"My officials are already hard at work at amassing the information on the proposed deal and we will commence a dialogue with that company to understand what their intentions are," said Clement.
Although he remained vague on a timeline, Clement said he recognized Avaya will be eager to know if the investment meets the government's approval or what changes would be required to push the deal through.
"We are understanding of market forces but at the same time we have to do our due diligence," he said.
Meanwhile Avaya said it looked forward to working with Industry Canada and a review division in the U.S. to finalize the transaction but remained tight-lipped when pressed for details.
"We can't comment on what we expect to hear," said Avaya spokeswoman Lynn Newman adding that the reviews were considered regulatory steps which had to occur.
The company is targeting a closing date in early December, according to a document on its website.
Avaya also dismissed reports last week that suggested as many as 400 former Nortel employees stood to loose their jobs as part of the proposed sale.
"We're focusing now on retaining as many jobs as possible and we expect to retain a significant number of employees in Canada," said Newman. "It's premature to talk about the specifics."
Newman added that Avaya also expected to maintain Nortel's key research facilities in Belleville, Ont., and Ottawa.
The enterprise unit currently employs close to 1,000 people in Canada.
Once reviewed, Avaya aims to discuss its targeted portfolio and a road map for the enterprise unit within a month of the transaction closing.
"We're going to provide continuity not only to Avaya customers but to customers of Nortel Enterprises as well," Newman said.
Existing Nortel products will continue to be shipped for a year after the deal is closed, while customer service will also continue for existing products that fall into Avaya's hands.
"It's really all about the customers," Newman said.
Avaya said it hopes to use Nortel to expand its global footprint and ramp up its portfolio in small and medium businesses.
"We're very excited to be brining on Nortel people, their expertise, their product lines and their significant customer relationships," said Newman. "We compliment each other."
Besides the sale to Avaya, Nortel has sold its wireless business to Sweden's LM Ericsson for US$1.13 billion.
Clement said Ottawa did not review the Ericsson deal because the book value of the wireless unit was below the review threshold.
Earlier this week, Nortel announced plans to sell its last major unit, its Carrier Networks business in an auction.
The assets include software to support the transfer of data over existing wireless networks and the next generation of wireless communications technology.
Nortel said it also expects to grant the buyer a non-exclusive licence of relevant patent intellectual property in connection with the sale.
The proposed auction follows several others for the company which is slowing selling its parts off under court protection from creditors.
As Nortel offloads its assets, Clement said the breakdown of the company should not be seen as a void in the Canadian information market.
"I get my dander up a little bit when some people proclaim that the demise of Nortel means the demise of the IT sector in Canada," he said. "Nothing can be further form the truth."
