Nortel was once the biggest tech employer in Canada. It has benefited from billions of dollars in tax breaks and special funding from the Canadian government. It has fallen on hard times – and was seeking a bailout from the Canadian government. The Canadian governement said no deal. At about the same time, Chrysler and GM, not based in the Canada, did get close to $10B from the Canadian government in the auto company bailout.
So the Canadian government chose to let Nortel go bankrupt … let the company be broken up and let the “efficient” markets do its clean up duty. And now the fun begins.
The best offer until 2 days before closing date of the bids was $650M from Siemens-Nokia. But within the past two days bids of $725Million from a private equity group and $730million from Ericsson have been received. But the kicker is that Canadian firm RIM with a bid of $1.1B for the same wireless unit plus patents has been rejected by Nortel and the bankruptcy court. The problem? RIM wants more than the wireless unit – and the bankruptcy court has said that you cannot bid on both – if you go for the wireless unit, then you cannot bid on any other assets for a year. Strange rule. Strange decision to bypass a Canadian bid and the highest bid so far.
So far the Canadian government has stayed out of the process:” 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.” according to Tony Clement the Minister of Industry. The fact that the bankruptcy is being being done in a US Delaware court does appear to hamstring the government. But it strongly echos another bankruptcy blast from the past when 50 years ago the Conservative government under PM Diefenbaker shuttered another Canadian technology development, the AVRO Arrow. The Conservatives under PM Stephen Harper may be letting history repeat itself. After the AVRO failure the Conservatives were voted out of office and failed to return to leadership for 25 years and have have been in power only 9 of the past 60 years.
What is most intriguing is, though the government may have no influence in the Delaware Court, Nortel itself does. And so far they keep saying that RIM has to obey the rules of the court. Strange brew – why would Nortel executives and directors reject an offer that a)keeps the assets in Canada and b)offers the best dollars deal at $1.1B? Only the Shadow knows what evil lurks in the minds of Canadian Businessmen.