Nortel To Sell Enterprise Solutions Business>
Nortel To Sell Enterprise Solutions Business
(Thomson Reuters ONE) - - Enters into Sale Agreements for Enterprise Solutions Business withAvaya for US$475 million- Sale of Businesses is Best Path for Nortel to Maximize Value WhilePreserving Innovation, Customer Relationships and Jobs to GreatestExtent Possible- Focus on Customers Continues Across all Businesses with CustomerService Levels at Multi-year HighsTORONTO, ONTARIO--(Marketwire - July 20, 2009) - Nortel(1) NetworksCorporation (OTCBB: NRTLQ) today announced that it, its principaloperating subsidiary Nortel Networks Limited (NNL) and certain of itsother subsidiaries, including Nortel Networks Inc. and NortelNetworks UK Limited, have entered into a "stalking horse" asset andshare sale agreement with Avaya Inc. (Avaya) for its North American,Caribbean and Latin America (CALA) and Asia Enterprise Solutionsbusiness; and an asset sale agreement with Avaya for the Europe,Middle East and Africa (EMEA) portion of its Enterprise Solutionsbusiness for a purchase price of US$475 million. These agreementsinclude the planned sale of substantially all of the assets of theEnterprise Solutions business globally as well as the shares ofNortel Government Solutions Incorporated (NGS) and DiamondWare, Ltd.Commenting on the announcement, Nortel President and Chief ExecutiveOfficer, Mike Zafirovski said:"We continue to be fully focused on running our operations andcontinuing to serve our customers while actively engaged in the saleof our businesses. We have determined that the sale of our businessesmaximizes value while preserving innovation platforms, customerrelationships and jobs to the greatest extent possible. The CDMA andLTE Access stalking horse asset sale agreement announced on June19th, and today's agreements around our Enterprise business are solidproof of that value. This represents the best path forward, and weare advancing in our discussions with interested parties for ourother businesses.""The many customers I have spoken with have been highly supportive ofour efforts and transparency throughout this process. They value ouremployees and technology platforms and are appreciative of ourservice levels which are at multi-year highs.""Today's agreements underscore the value of Enterprise Solutions andthe investments we have made in enterprise telephony, unifiedcommunications and data networking core competencies. If successfullycompleted, this transaction will provide clarity on the path forwardfor our Enterprise customers, partners and employees, and enable theindustry to continue to benefit from Nortel-created technology,know-how and leading-edge innovation.""We have some of the best talent in the industry and will explore allpotential opportunities for them as we move through this process."In EMEA any impact on the Enterprise Solutions workforce inconnection with this proposed transaction will be considered as partof any required information and consultation process with employeerepresentatives or employees.Joel Hackney, President, Enterprise Solutions added: "The successfulbuyer will gain access to an industry-leading portfolio that isoptimized for real-time communications, bringing speed and simplicityto customers' network environments and allowing them to enhancecollaboration, streamline business processes and improveproductivity."Hackney continued: "Enterprise Solutions has strong relationshipswith key customers and partners around the world, and we have helpedthem achieve industry-leading differentiation and competitiveadvantages. We remain committed to serving them without interruptionthrough this process and, as we move forward, we pledge tocommunicate our progress to the greatest extent possible."Chuck Saffell, Chief Executive Officer of Nortel GovernmentSolutions, said: "Nortel Government Solutions has built a robustproduct and services business for U.S. Federal government customers.If successfully concluded, this agreement will offer Avaya theopportunity to continue to grow this business and bring further valueto customers."Details of Sale ProcessNortel will file the stalking horse asset and share sale agreementwith the United States Bankruptcy Court for the District of Delawarealong with a motion seeking the establishment of bidding proceduresfor an auction that allows other qualified bidders to submit higheror otherwise better offers, as required under Section 363 of the U.S.Bankruptcy Code. A similar motion for the approval of the biddingprocedures will be filed with the Ontario Superior Court of Justice.Following completion of the bidding process, final approval of theU.S. and Canadian courts will be required.In relation to the EMEA entities to which they are appointed, the UKJoint Administrators have the authority, without further courtapproval, to enter into the EMEA asset sale agreement on behalf ofthose relevant Nortel entities. In some EMEA jurisdictions, thistransaction is subject to information and consultation with employeerepresentatives prior to finalization of the terms of sale.In addition to the processes and approvals outlined above,consummation of the transaction is subject to the satisfaction ofregulatory and other conditions and the receipt of various approvals,including governmental approvals in Canada and the United States andthe approval of the courts in France and Israel. The stalking horseasset and share sale agreement and the EMEA asset sale agreement arealso subject to purchase price adjustments under certaincircumstances.Share Value; Certain Potential Tax Consequences of TSX DelistingAs previously announced in the Company's news release of June 19,2009, Nortel does not expect that the Company's common shareholdersor the NNL preferred shareholders will receive any value from thecreditor protection proceedings and expects that the proceedings willresult in the cancellation of these equity interests. The Company andNNL applied to delist their shares from trading on the Toronto StockExchange (TSX) and delisting occurred on June 26, 2009 at the closeof trading.As a result of the TSX delisting, certain sellers of Nortel shareswho are not residents of Canada for purposes of the Income Tax Act(Canada) may be liable for Canadian tax and may be subject to taxfiling requirements in Canada as a result of the sale of such sharesafter June 26, 2009. Also, purchasers of Nortel shares fromnon-residents may have an obligation to remit 25% of the purchaseprice to the Canada Revenue Agency. Parties to sales of Nortel sharesinvolving a non-resident seller should consult their tax advisors orthe Canada Revenue Agency. The statements herein are not intended toconstitute, nor should they be relied upon as, tax advice to anyparticular seller or purchaser of NNC common shares or NNL preferredshares.About NortelNortel delivers communications capabilities that make the promise ofBusiness Made Simple a reality for our customers. Our next-generationtechnologies, for both service provider and enterprise networks,support multimedia and business-critical applications. Nortel'stechnologies are designed to help eliminate today's barriers toefficiency, speed and performance by simplifying networks andconnecting people to the information they need, when they need it.For more information, visit Nortel on the Web at www.nortel.com. Forthe latest Nortel news, visit www.nortel.com/news.Certain statements in this press release may contain words such as"could", "expects", "may", "should", "will", "anticipates","believes", "intends", "estimates", "targets", "envisions", "seeks"and other similar language and are considered forward-lookingstatements or information under applicable securities laws. Thesestatements are based on Nortel's current expectations, estimates,forecasts and projections about the operating environment, economiesand markets in which Nortel operates. These statements are subject toimportant assumptions, risks and uncertainties that are difficult topredict, and the actual outcome may be materially different. Further,actual results or events could differ materially from thosecontemplated in forward-looking statements as a result of thefollowing (i) risks and uncertainties relating to Nortel's CreditorProtection Proceedings including: (a) risks associated with Nortel'sability to: stabilize the business and maximize the value of itsbusinesses; obtain required approvals and successfully consummatepending and future divestitures; successfully conclude ongoingdiscussions for the sale of Nortel's other assets or businesses;develop, obtain required approvals for, and implement a courtapproved plan; resolve ongoing issues with creditors and other thirdparties whose interests may differ from Nortel's; generate cash fromoperations and maintain adequate cash on hand in each of itsjurisdictions to fund operations within the jurisdiction during theCreditor Protection Proceedings; access the EDC Facility given thecurrent discretionary nature of the facility, or arrange foralternative funding; if necessary, arrange for sufficientdebtor-in-possession or other financing; continue to have cashmanagement arrangements and obtain any further required approvalsfrom the Canadian Monitor, the U.K. Joint Administrators, the FrenchAdministrator, the Israeli Joint Administrators, the U.S. Creditors'Committee, or other third parties; raise capital to satisfy claims,including Nortel's ability to sell assets to satisfy claims againstus; maintain R&D investments; realize full or fair value for anyassets or business that are divested; utilize net operating losscarryforwards and certain other tax attributes in the future; avoidthe substantive consolidation of NNI's assets and liabilities withthose of one or more other U.S. Debtors;attract and retain customers or avoid reduction in, or delay orsuspension of, customer orders as a result of the uncertainty causedby the Creditor Protection Proceedings; maintain market share, ascompetitors move to capitalize on customer concerns; operate Nortel'sbusiness effectively in consultation with the Canadian Monitor, andwork effectively with the U.K. Joint Administrators, FrenchAdministrator and Israeli Joint Administrators in their respectiveAdministration of the EMEA businesses subject to the CreditorProtection Proceedings; actively and adequately communicate on andrespond to events, media and rumors associated with the CreditorProtection Proceedings that could adversely affect Nortel'srelationships with customers, suppliers, partners and employees;retain and incentivize key employees and attract new employees, asmay be needed; retain, or if necessary, replace major suppliers onacceptable terms and avoid disruptions in Nortel's supply chain;maintain current relationships with reseller partners, joint venturepartners and strategic alliance partners; obtain court orders orapprovals with respect to motions filed from time to time; resolveclaims made against Nortel in connection with the Creditor ProtectionProceedings for amounts not exceeding Nortel's recorded liabilitiessubject to compromise; prevent third parties from obtaining courtorders or approvals that are contrary to Nortel's interests; reject,repudiate or terminate contracts; and (b) risks and uncertaintiesassociated with: limitations on actions against any Debtor during theCreditor Protection Proceedings; the values, if any, that will beprescribed pursuant to any restructuring plan to outstanding Nortelsecurities;the delisting of NNC common shares from the NYSE; and the delistingof NNC common shares and NNL preferred shares from the TSX; and (ii)risks and uncertainties relating to Nortel's business including: thesustained economic downturn and volatile market conditions andresulting negative impact on Nortel's business, results of operationsand financial position and its ability to accurately forecast itsresults and cash position; cautious capital spending by customers asa result of factors including current economic uncertainties;fluctuations in foreign currency exchange rates; any requirement tomake larger contributions to defined benefit plans in the future; ahigh level of debt, arduous or restrictive terms and conditionsrelated to accessing certain sources of funding; the sufficiency ofworkforce and cost reduction initiatives; any negative developmentsassociated with Nortel's suppliers and contract manufacturersincluding Nortel's reliance on certain suppliers for key opticalnetworking solutions components and on one supplier for most of itsmanufacturing and design functions; potential penalties, damages orcancelled customer contracts from failure to meet contractualobligations including delivery and installation deadlines and anydefects or errors in Nortel's current or planned products;significant competition, competitive pricing practices, industryconsolidation, rapidly changing technologies, evolving industrystandards, frequent new product introductions and short product lifecycles, and other trends and industry characteristics affecting thetelecommunications industry; any material, adverse affects onNortel's performance if its expectations regarding market demand forparticular products prove to be wrong; potential higher operationaland financial risks associated with Nortel's internationaloperations; a failure to protect Nortel's intellectual propertyrights; any adverse legal judgments, fines, penalties or settlementsrelated to any significant pending or future litigation actions;failure to maintain integrity of Nortel's information systems;changes in regulation of the Internet or other regulatory changes;and Nortel's potential inability to maintain an effective riskmanagement strategy. For additional information with respect tocertain of these and other factors, see Nortel's Quarterly Report onForm 10-Q for the quarter ended March 31, 2009 and Annual Report onForm 10-K for the year ended December 31, 2008 and other securitiesfilings with the United States Securities and Exchange Commission.Unless otherwise required by applicable securities laws, Norteldisclaims any intention or obligation to update or revise anyforward-looking statements, whether as a result of new information,future events or otherwise.For the Companies listed below, The Institute of CharteredAccountants in England and Wales authorises A R Bloom, S Harris and CHill to act as Insolvency Practitioners under section 390(2)(a) ofthe Insolvency Act 1986 and the Association of Chartered CertifiedAccountants authorises A M Hudson to act as an InsolvencyPractitioner under section 390(2)(a) of the Insolvency Act 1986.The affairs, business and property of the Companies are being managedby the Joint Administrators, A R Bloom, S Harris, AM Hudson and CHill who act as agents of the Companies only and without personalliability.The Companies are Nortel Networks UK Limited; Nortel Networks SA;Nortel GmbH; Nortel Networks France SAS; Nortel Networks NV; NortelNetworks SpA; Nortel Networks BV; Nortel Networks Polska SP Zoo;Nortel Networks Hispania SA; Nortel Networks (Austria) GmbH; NortelNetworks sro; Nortel Networks Engineering Service Kft; NortelNetworks Portugal SA; Nortel Networks Slovensko sro; Nortel NetworksOy; Nortel Networks Romania SRL; Nortel Networks AB; Nortel NetworksInternational Finance & Holding BV.(1)Nortel, the Nortel logo and the Globemark are trademarks of NortelNetworks.Contacts:NortelPat CooperMedia(425) 450-7523Email: pat.cooper(at)nortel.comNortelJay BartaMedia(972) 685-2381Email: jbarta(at)nortel.comNortelInvestors(888) 901-7286 or (905) 863-6049Email: investor(at)nortel.comWebsite: www.nortel.comThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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