Industry Committee on Aug. 7th, 2009

[Mike Lazaridis]

No, what we're saying is that during this entire process Nortel knew exactly what it was we were interested in and in fact, on several occasions, both before and after the bankruptcy announcement and proceedings, came very close to consummating a deal—so close that we were exchanging e-mails about a press release within a matter of days. What I'm saying is that in a situation where they knew what we were interested in, for them to say, “You were free to bid”, where signing an NDA that had a clause in it with a standstill for other assets...it just seemed almost disingenuous. But I'm not in any way suggesting that there was anything done that way; it just seemed that way.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Was the process set up in such a way in the end, even though it may not have been something that RIM liked, that in your view would have benefited Nortel stakeholders?

[Mike Lazaridis]

I can't see how wiping out the value of their intellectual property assets with the first transaction could benefit anyone.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Why would they do it, then? Why would they set it up in a way that hurt you and hurt them?

[Mike Lazaridis]

I don't really know why. All I know is that it benefited the stalking horse bidder.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I would imagine you had discussions with them about how this process was going to hurt you--several discussions, I would think. Did they in any way try to explain a rationale to you, and specifically what would that rationale have been?

[Mike Lazaridis]

It appeared at first they didn't understand the implications of some of the things they were declaring to us. What's important here is that they did understand what we were talking about. We made it very clear to them on several occasions the value of what we were interested in and why we were interested, what the value was of what we were interested in. So you are right that we had several discussions. We made it very clear to them. We even thought they understood exactly what we were interested in, because we had a deal with them for what we were interested in. So it was clear to them what we were intent on purchasing. It was a very unpleasant surprise to us to discover that in fact they had changed the agreement in such a way that it took away the value of what it is we were originally interested in and had believed we had a handshake on.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

You've said several times, or indicated, that you had a deal or were very close to a deal. Was the deal far enough along, or was it concluded in such a way, that you feel you could start taking legal action?

[Mike Lazaridis]

I think we did consider that. I'm not sure. I have to be very careful in matters of that type because I want to make sure we don't prejudice ourselves for any future dealings at that point, but we did consider it.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

You considered it, but in the end you have decided not to?

[Mike Lazaridis]

No, I'm just saying that we did consider it at the time. Again, I have to be careful. We haven't finished evaluating all our options to date. Much of this has happened very quickly, and that's one of the reasons we're here. We just want to make sure we don't rush into anything that we're going to regret in the future. I don't see any need for this rush.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Lake.

We're now going to go to Monsieur Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chairman.

I want you to know how much the Bloc Québécois respects your business. You, your associates and partners are well established in Canadian communities.

I'm going to start by citing an example from the world of sport. We're pleased that a new team is being established in Ontario, provided the Montreal Canadiens continue to be a top performing team. In this entire Nortel-Ericsson transaction—and you are a player... I quite like the conclusion of your presentation this morning, where you say this: “[...] I believe that the Minister of Industry should initiate a four-way discussion among the government, Nortel, Ericsson and RIM.”

Ericsson is solidly established in Montreal, Nortel in Ottawa and you in Waterloo and Toronto. What is the basis for your conclusion that you could offer the other parties full cooperation and perhaps come to an equitable solution for everyone?

[Mike Lazaridis]

That's a very good point. I've always believed that what blesses one can bless everyone. It's very important we understand that we're all in this together as Canadians. It's very important we understand the value of investing in cutting-edge technology and innovation in this country. I think we've understood that. The whole country and all the provinces are very much involved in investing in innovation, research, and education. It's a very important thing for us to do.

It's also important we understand that much of what has happened has happened. All we're asking is that before we rush to get rid of things that we believe are vitally important to Canada's future interests, we get together in a room—the government, Ericsson, Nortel, and RIM—and make sure that those benefits stay with Canada and are available for Canadians and Canadian industry to take advantage of in the future. That is what I think is very important.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I know you're not making it public this afternoon, but do you have a concrete proposal to make to the government, to Nortel and to Ericsson? Have you already considered a proposal that might benefit all the parties?

[Mike Lazaridis]

If we had, I think everyone would have been happy to enter into it.

We need to have this discussion to make sure all of us understand what the opportunities are, what the assets really are, what's going to happen to those assets, and what losing those assets or control of those assets is going to mean to our industry and our country. That's why I think it's very important to have this meeting.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Do you sincerely think that all the parties could get what they want out of it, Ericsson, Nortel, the government and your business?

[Mike Lazaridis]

I sincerely believe that if the government gets involved and brings these parties together, and these parties work in good faith negotiations, the outcome will at least be thorough. Regardless of what happens, we will all leave that meeting or those meetings better informed and better understanding the implications. Whether we accept them or not and are able to reach an agreement or not, at least we'll know that we've done the due diligence necessary before we give away such important valuable assets. That's the key.

[The Chair, Conservative, Michael Chong]

Thank you very much.

We'll now go to Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair, and welcome, gentlemen.

Mr. Lazaridis, you mentioned earlier that the terms of the stalking horse bid really denied you the opportunity to bid effectively in a manner that would benefit RIM, and yet when Nortel was here earlier today, they said to us that the courts allowed an opportunity to either object or modify the terms of the bid. Did you exercise any option in this manner or discuss this with the court?

[Mike Lazaridis]

This was largely a U.S. procedure, largely handled in the U.S.

I think what's critically important here is that the bid itself did not present a barrier to us. What presented a barrier to us was that to become eligible to make a formal bid required us to sign an NDA that had a clause in it that we call a standstill clause. This meant that we could only make a bid on one asset at a time, and that once you made a bid on one of the assets, you were precluded from making a bid on other assets for a period of one year. That seems a bit absurd when you're going through a liquidation process, where everyone's trying to rush to a conclusion as fast as possible.

You have to understand that to the other bidders it was an irrelevant clause, because they got what they wanted. But Nortel knew exactly what we were interested in, and that bid precluded us from entering the bidding process, because if we did, we couldn't bid on the assets that we were interested in.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Without giving away anything in our conversations or deliberations, why particularly was it irrelevant to the other bidders but not to RIM?

[Mike Lazaridis]

Because they were interested in other assets. We needed rights to two of those assets, and the way it was split up and the way the bidding process was set up, we couldn't go for both those assets at the same time.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Right. Did you voice objection with the courts somehow, either in a letter or personal contact or representation?

[Mike Lazaridis]

No, we believed it was too late.