Nortel Networks today confirmed that it is seeking a buyer for its majority stake in its joint venture with Korean vendor LG Electronics. Rumors of the sale of Nortel’s business divisions have been circulating since the company filed for Chapter 11 bankruptcy earlier this year. While it has acknowledged it is in negotiations to sell some of its business units, today is the first specific plans Nortel has confirmed.
In a press release announcing the planned divestiture this afternoon, Nortel stressed that LG-Nortel is a profitable, standalone business with a strong balance sheet and that it hasn’t filed for creditor protection. The joint company has been profitable since it was established in November 2005, but Nortel said it will seek a buyer to “secure a sound future for the LG-Nortel business, its valued customers and loyal employees.”
“As we work to evaluate the ultimate path forward for all of our businesses, this decision will allow LG-Nortel to embark on the next phase of its journey and realize its full potential,” said president and CEO of Nortel Mike Zafirovski in the statement.
The planned divesture comes after Nortel has faced increasing pressure from its creditors to divest key product groups or break itself up for sale. The vendor, which makes wireless and fixed-line equipment, sold off much of its 3G portfolio to Alcatel-Lucent in 2006, but has focused on its 4G long-term evolution product development with LG since then. Nortel is also looking to separate its Carrier Networks, Metro Ethernet Networks and Enterprise Solutions groups into standalone divisions.
The Canada-based company will file a motion with the Ontario Superior Court of Justice for approval of a proposed sale process for its 50% + 1 share of the company. It has hired investment bank Goldman Sachs to help with the sale, which will require LG’s consent and further approval from the Ontario Court.