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Harper government urged to intervene on Nortel sale

The Globe and Mail reports that, “The Harper government is facing growing pressure to intervene in the liquidation of Nortel Networks Corp., but shows no signs of supporting an effort by Research In Motion Ltd. to keep assets of the company in Canadian hands.”

They report that, “(Sweden’s telecommunications giant) Ericsson (which submitted a winning $1.13 billion US bid for Nortel’s wireless unit) will likely have to win approval from the government under an Investment Canada review.”

“The threshold for review is $312-million and, while many of the Nortel assets in the package are non-Canadian, it would almost certainly likely trigger a review, a senior government official said.”

But the Canwest News Service reports that, “Since the assets being acquired by Ericsson are less than $312 million – as distinct from the purchase price – there is no automatic review under the applicable legislation. To justify an intervention, Canada must determine if the acquisition runs afoul of national security.”

It should also be noted that the Financial Post reported in March that, “Under amendments to the Investment Canada Act contained in the budget bill, the Conservatives have proposed raising the threshold under which foreign takeovers by companies from WTO-member countries come under review to $1-billion in enterprise value. The current threshold is $312-million in asset value. …The increase (is) to be phased in over four years…”

(Council of Canadians opposition to raising the threshold of review to $1 billion was reported in the Toronto Star, see http://canadians.org/campaignblog/?p=35.)

“Liberal Leader Michael Ignatieff sent an open letter to Prime Minister Stephen Harper, demanding a review of the Ericsson deal…”

“In his letter, Mr. Ignatieff urged the government to ‘immediately undertake a full review of the sale of Nortel Networks’ wireless assets to make sure the transaction is in Canada’s interest.'”

Ignatieff also wrote in his letter that, “Canada has a long tradition of welcoming foreign direct investment. We need to be open and attractive to foreign capital but we must also be certain that we can intervene to ensure Canadian interests.”

“New Democratic Party Leader Jack Layton scheduled a news conference for Tuesday to demand Nortel’s assets remain in Canadian hands.”

“In a highly unusual move, Ontario Finance Minister Dwight Duncan (is) arguing the proposed $1.13-billion foreign acquisition of its wireless division should be blocked.The Ontario government is spending billions of dollars to encourage the development of high-technology companies in the province, and is dismayed at the prospect of a foreign company benefiting from Nortel’s world-beating patents in wireless communication…”

(The Globe and Mail‘s editorial board says, “For Canadian public policy, the essence of the transaction is in the patents and continuing research that contribute to the ‘long-term evolution’ technology…”)

“Industry Minister Tony Clement indicated that Ottawa is still mulling its options…”

“Under the (Investment Canada) act, the government must determine whether a foreign acquisition represents a net benefit to Canada. Governments have rarely turned down a foreign acquisition under the Investment Canada Act, but typically use (read ‘but can use’) the review to wring promises to maintain jobs and investment in the country.”

“A year ago, the Harper government cited national security concerns to reject a proposed $1.3-billion (U.S.) takeover of MacDonald Dettwiler and Associates Ltd. of Richmond, B.C., by U.S.-based Alliant Techsystems.”

The full article is at http://www.theglobeandmail.com/report-on-business/ontario-urges-pm-to-block-foreign-nortel-sale/article1233034/.