Industry Canada

Industry Canada

September 16, 2009 16:58 ET

Minister Clement Issues Government of Canada Decision on Nortel Sale to Ericsson

TORONTO, ONTARIO--(Marketwire - Sept. 16, 2009) - Today, the Honourable Tony Clement, Minister of Industry, issued the following statement regarding the proposed acquisition of certain Nortel Networks Corp. assets by Telefonaktiebolaget LM Ericsson (Ericsson) of Sweden:

"After a careful examination of the applicable rules and threshold values under the Investment Canada Act, I have determined that the sale is not subject to review under the Act.

"The current threshold for review is $312 million. Based on materials prepared and validated by two public accounting firms and in light of the testimony presented before the House of Commons Standing Committee on Industry, Science and Technology, I am satisfied that the assets being sold fall below that threshold.

"In addition, based on all the information presented to me, there are no grounds to believe that this transaction could be injurious to Canada's national security.

"The federal government remains committed to the information and communications technologies (ICT) sector and looks forward to Ericsson remaining a significant driver of ICT productivity in Canada. Indeed, the company has contributed to our country's telecommunications infrastructure and has invested more than $2 billion in research and development in Canada over the past decade.

"As Minister of Industry, my focus is to protect Canadian jobs and intellectual property, and I believe this sale achieves those two objectives.

"The sale of Nortel's wireless assets to Ericsson included a non-exclusive licensing agreement for certain Long Term Evolution (LTE) wireless technologies. The property rights to the patents for these technologies remain with Nortel.

"Ericsson is showing its intent to retain the Canadian Nortel employee base; approximately 800 workers have been offered positions at substantively the same pay and benefits and based in the same location. According to the company, the overwhelming majority of employees have accepted the Ericsson offer.

"With a stellar reputation in the Canadian ICT sector - and in research - Ericsson also has the resources and customer base to bring Canadian innovation to market. This deal is beneficial to Canada and will help Canada compete on the world stage."


BACKGROUNDER

Investment Canada Act

The Investment Canada Act (ICA) came into force on June 30, 1985, and was amended in March 2009. It is administered by the Investment Review Division of the Small Business and Marketplace Services Sector of Industry Canada.

Mandate

The regulatory mandate of the ICA is to i) review significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada; and ii) review investments in Canada by non-Canadians that could be injurious to national security.

Organization

Under the ICA, where a non-Canadian acquires control of a Canadian business, the non-Canadian must file either a notification or an application for review. Acquisitions of control of a Canadian business by a non-Canadian in which the value of the assets of the Canadian business is above the established threshold must be reviewed. The 2009 threshold for review for direct acquisitions by countries in the World Trade Organization is $312 million in assets of the Canadian business.

There are some exceptions. Where both the buyer and seller are not from countries or entities that are members of the World Trade Organization, the review threshold is $5 million for direct acquisitions and $50 million for indirect acquisitions. These lower thresholds also apply when the Canadian business to be acquired is a cultural business.

All other acquisitions and the establishments of a new Canadian business require notification under the ICA, but no formal review takes place.

Case Review - Net Benefit Test

Reviewable investments are allowed to proceed only if the investor demonstrates that the investment will likely be of net benefit to Canada. The ICA sets out the factors to be taken into account:

(a) the level and nature of economic activity in Canada, including employment; resource processing; the use of parts, components and services produced in Canada; and exports from Canada

(b) the degree and significance of participation by Canadians

(C) the effect of the investment on productivity, industrial efficiency, technological development, product innovation and variety

(d) competition in Canada

(e) compatibility with national industrial, economic and cultural policies

(f) Canada's ability to compete in world markets

Investors demonstrate net benefit to Canada by detailing their plans for the Canadian business. Frequently, formal undertakings are negotiated with the investor on key commitments.

The Minister consults with the provinces/territories in which the Canadian business has significant activity, with the federal government department with policy responsibilities for the industry involved, and with other sectors of Industry Canada when required.

National Security

The purpose of the ICA has been expanded to include reviews of investments that could be injurious to national security.

The Governor in Council (GiC) may order a national security review of an investment, based on the Minister of Industry's recommendation, and in consultation with the Minister of Public Safety, if the Minister of Industry considers that the investment could be a threat to national security.

The GiC may order any measures to be taken that the GiC considers advisable to protect national security, including but not limited to directing the investment not to be implemented, authorizing the investment on certain conditions and requiring the investor to divest control of the Canadian business or investment.

Confidentiality

All information obtained in the course of administering the ICA is strictly confidential. The Department often receives advance notice of takeovers, is given highly confidential information by an investor during the review process, and receives information from third parties. This information cannot be divulged to anyone, except the Minister and those officials (case review officers and legal services personnel, the Deputy Director and the Director of Investments) directly involved in the review process. The disclosure of information outside of the narrow exceptions defined in the Act is a criminal infraction.

Contact Information

  • Office of the Honourable Tony Clement
    Minister of Industry
    Lynn Meahan - Press Secretary
    613-995-9001
    or
    Industry Canada
    Media Relations
    613-943-2502