U.S., Canada courts approves Nortel enterprise unit auction
By Tom Hals
WILMINGTON, Delaware (Reuters) - Bankrupt Nortel Networks Inc received U.S. and Canadian court approval on Tuesday to sell its enterprise business, further dismantling the former corporate icon.
Nortel, based in Toronto, said it reached a "stalking horse" agreement to sell the enterprise business to Avaya Inc for $475 million after considering four potential bids. The unit makes networks for companies,
The Avaya agreement will set the floor for bidding in an auction, approved by a bankruptcy court in Delaware and a court in Ontario during joint hearings linked by video.
Nortel had resolved 10 objections to the proposed bidding procedures, including those from potential bidders, Nortel's lead U.S. attorney said at Tuesday's hearing.
The company filed for bankruptcy protection in Canada and the United States in January, blaming the economic crisis for derailing an effort to turn around what was once the top maker of telephone equipment in North America.
The company said it is selling the enterprise business, which allows customers to combine voice and data needs, because of competition from companies such as Cisco Systems Inc, and because it does not have the resources to maintain the business.
"The business needs to be sold to preserve and maximize value for all stakeholders," said Derrick Tay, of Ogilvy Renault, which represents Nortel in Canada. "The intricacies of trying to sell this outside of a (bankruptcy) filing were too difficult to achieve."
Nortel's business has been deteriorating during the company's stay in bankruptcy because customers fled when contracts expired, its U.S. attorney, James Bromley of Cleary Gottlieb Steen & Hamilton LLP, said at the hearing. Continued...