Canadian government mulls Ericsson-Nortel intervention

The Canadian government is considering taking action against Ericsson's $1.13 billion bid to acquire Nortel Networks' wireless assets, even as the process hurtles toward court approval today.

Research In Motion, the Canadian BlackBerry maker that failed to make its $1.1 billion bid for Nortel official, has been urging the Canadian government to get involved to "protect vital Canadian interests." Bankruptcy courts in Toronto and Wilmington, Del., are expected to rule on the deal today.

"We just think that every step should be taken to try to keep these patents in Canadian hands so that industry can continue to develop here in Canada," Ontario Finance Minister Dwight Duncan told the Globe and Mail. "These have been developed over time, with enormous federal and provincial tax credits available, and we think it is in the interest of Canada, particularly Ontario in this case, to keep those patents here." Ontario's government is trying to encourage high-tech business development in the province.

It's unclear whether the Canadian government will act. "I'm not ruling out intervening and I'm not ruling out not intervening," Canadian Industry Minister Tony Clement said. "Right now, in order to be non-prejudicial or non-prejudged of the issue, I have to keep my options open obviously and make sure that all the facts are before me and the government. That's basically where we are."

Under the Investment Canada Act, Canada has the power to block a foreign investment because of national security. One senior Canadian government official told the Globe and Mail that Ericsson's acquisition would be looked at under the act, assuming courts approve it. 

In another twist to the Nortel saga, Flextronics said it has withdrawn its objections to the sale of Nortel's wireless technology. Flextronics, Nortel's largest supplier, said it will support Ericsson's bid following a deal that will see Ericsson pay Flextronics the $8 million it said it is owed under previous agreements with Nortel. Flextronics and Ericsson will then sign a new supply agreement if Ericsson completes its purchase of Nortel's assets.   

For more:
- see this Dow Jones Newswires article [1] (sub. req.)
- see this Globe and Mail article [2]
- see this Globe and Mail article [3]
- see this Reuters article [4]

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