Ericsson AB (NASDAQ:ERIC) has announced the acquisition of the wireless- equipment unit of the insolvent Nortel Networks Corp. (OTC:NRTLQ), relating to CDMA and LTE technology in North America, for $1.13 billion on a cash and debt free basis. Ericsson won the auction for the assets of the Toronto-based company Nortel late Friday, after beating out bids from Nokia Siemens Networks (NYSE:NOK) and distressed-debt investor MatlinPatterson Global Advisers LLC. The Matlin shop is among Nortel’s largest bondholders. It holds $400 million in Nortel bond debt.
The new acquisition of parts of the Carrier Networks division of Nortel, significantly boosts Ericsson’s presence in North America. In a release, the company said Nortel’s CDMA operations generated approximately $2 billion in 2008, compared with sales of about $2.7 billion — mainly from GSM and WCDMA equipment — for Ericsson’s North American business that year.
“Acquiring Nortel’s North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE [long term evolution, a wireless broadband technology],” said Carl-Henric Svanberg, President and CEO of Ericsson. “This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America.”
The combination will leave North America the largest region within Ericsson. The Stockholm-based Ericsson has agreed to offer jobs to at least 2,500 employees of the Nortel units, of which about 400 are focused on LTE research and development.
Ericsson projects the new acquisition will add to its earnings within a year of closing. The transaction is subject to court and customary regulatory approvals.