OTTAWA - The sale of Nortel Networks' patent portfolio to a group of technology heavyweights, including Canada's Research In Motion Ltd., could face a review under the Investment Canada Act.
Industry Minister Christian Paradis is asking his officials to look into how the act may apply to the sale. If they find the auction is subject to review, the minister must conclude that the sale is of "net benefit" to Canada before approving the deal.
"The minister has asked his officials to look into how the Investment Canada Act may apply to this transaction," Industry Canada said in brief a statement Wednesday.
A consortium dubbed "Rockstar" comprised of RIM (TSX:RIM), Apple, EMC, Ericsson, Microsoft and Sony won the auction for more than 6,000 patents with an offer of US$4.5 billion last week.
Waterloo, Ont.-based RIM's share amounted to $770 million or 17 per cent of the total purchase price, however how the ownership structure of the patents within the consortium has not been disclosed.
The group beat out Google and others for the patents, which include technology that is expected to be the backbone of wireless networks for the next decade.
Under the act, deals involving foreign investors buying a Canadian business with assets worth more than C$312 million are subject to review.
NDP Industry critic Peter Julian called on the government to hold public consultations on the sale.
"The government has tended to rubber stamp in the past, I'm certainly hoping that they do not rubber stamp this time," he said.
"We're talking about the developments of patents that involved public money."
Much of Nortel's research and development was done in Ottawa, at a facility formerly known as Bell Northern Research, although the company also had research facilities around the world.
Once Canada's technology superstar, Nortel has been selling assets to repay creditors since filing for court protection under the Companies' Creditors Arrangement Act in January 2009.
The patent portfolio was the last major technology asset Nortel had left to sell.
A joint hearing to approve the sale by the courts in Canada and the United States overseeing the sale of the Nortel assets is scheduled for July 11.
Ernst and Young, the monitor overseeing process, recommended Wednesday that the courts approve the sale.
"The monitor is satisfied that the purchase price for the assets constitutes fair consideration for such assets. As a result, the monitor is of the view that the sale agreement represents the best transaction for the sale of the residual IP," the firm wrote in its report.
The company has held several auctions for its various divisions and assets that have required a review under the Investment Canada Act.
In 2009, then-industry minister Tony Clement signed off on Nortel's sale of its Metro Ethernet Networks division to U.S.-based Ciena Corp. for $769 million. The government also approved the sale of Nortel's enterprise solutions business to Avaya Inc. for $900 million.
However the Conservative government has been known to say no to sales under provisions of the Investment Canada Act.
Clement blocked BHP Billiton's hostile takeover bid for PotashCorp (TSX:POT) last year and, in 2008, then-industry minister Jim Prentice blocked the sale of MacDonald, Dettwiler and Associates Ltd.'s (TSX:MDA) space business to U.S. defence contractor Alliant Techsystems Inc.
