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Avaya's Nortel Deal Faces Scrutiny in Canada

Avaya's proposed $900 million deal to acquire the assets of Nortel's Enterprise business unit is set to face additional scrutiny now that the Canadian Government has announced it will be reviewing the deal.

The deal, which will see all of Nortel's enterprise assets move to Avaya, received the approval of a U.S Bankruptcy Court judge last week. Nortel has been under bankruptcy protection in the U.S and Canada since January of this year.

In a statement, Tony Clement, Canadian Minister of Industry, noted that the Avaya acquisition will be reviewed under the Investment Canada Act (ICA). Nortel is headquartered in Canada and has benefited from government initiatives over the years.

"The Nortel assets being sold to Avaya exceed the threshold set by the ICA ($312 million); therefore a review is automatically required," Clement said in a statement. "I only approve applications where the investor demonstrates that its investment is likely to be of net benefit to Canada."

An Avaya spokesperson told InternetNews.com that The Investment Canada Act review was not unexpected.

"Avaya recognizes the authority and jurisdiction of the Minister of Industry, respects the process and looks forward to working with Industry Canada and the Investment Review Division to finalize a transaction that we believe will bring inherent benefit and value to Canada," Avaya said in a statement.

A Nortel spokesperson noted that the review is a procedural issue that is automatically triggered by the book value of the sale.

This isn't the first time that Nortel's acquisition sell-off has generated interest from the Government of Canada. In August, Nortel executives were brought in front of a Canadian Government committee on the proposed $1.13 Billion wireless asset sale to Ericsson. That committee appearance was triggered in part by a competitive complaint from wireless giant Research in Motion (RIM). RIM had publicly stated that they had been unfairly excluded from the asset sale proceedings.

Make way for new products

Even with the pending enterprise asset sale, Nortel is still making new product announcements.

Today Nortel announced new software based unified communications solutions. The Mobile Cost Optimizer solution is intended to help enterprises determine and optimize their mobile costs and lower those costs by more effective call routing. The 'Hot Desking' solution is a new single number call hunting service that routes calls to wherever a user might be.

In terms of Nortel's assets, with the Wireless and Enterprise divisions now in the closing stages of their respective sell-offs, there is still one major division that has yet to be auctioned off -- its carrier or packet core division. Earlier in the week, Nortel announced that it filed a motion with the United States Bankruptcy Court to enable bidders to submit offers for the packet core assets.