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uisitions and divestitures
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uisitions
N
orthern Telecom France
On June 24, 2003, Nortel Networks S.A. acquired the outstanding shares of Northern Telecom France from NNI for a purchase price of
83,800 in cash. The purchase price has been presented as a decrease of 83,800 in the additional paid-in capital of Nortel Networks S.A.
as Northern Telecom France has already been included in the financial statement presentation for all periods (see note 2). Northern
Telecom France is a holding company that was then holding interests of 17.8% in Nortel Networks France and 13.2% in EADS Telecom.
N
ortel Networks France
On October 19, 2002, Nortel Networks S.A., and certain other subsidiaries of Nortel Networks, entered into a number of conditional put
option and call option agreements as well as a share exchange agreement with European Aeronautic Defence and Space Company EADS
N.V. (“EADS”), Nortel Networks partner at that time in three European joint ventures. On July 1, 2003, EADS exercised its put option to
sell its minority interest of 45 percent in Nortel Networks France to Nortel Networks S.A., which then immediately exercised its put
option to sell this interest to Nortel Networks. The transactions were completed on September 18, 2003. As a result, the put option
liability to EADS and the put option asset from Nortel Networks, both in the amount of
77,500, were removed from the balance sheet of
Nortel Networks S.A. as of that date.
On December 18, 2003, Nortel Networks S.A. acquired the remaining interest in Nortel Networks France from Nortel Networks and
NNIF&HB.V.forapurchasepriceof
39,375 (including 34,460 in cash) and 31,017 respectively. The acquisition of the remaining
interest in the net assets of Nortel Networks France was recorded using their historical costs as recorded by Nortel Networks and
NNIF&H B.V. The interest acquired from Nortel Networks was recorded in the accompanying financial statements on September 18,
2003, the date the interest was acquired by Nortel Networks from EADS. This acquisition resulted in a reduction of minority interest of
10,512 and recording of 9,180 related primarily to customer contracts and customer relationships (“customer related intangibles”) and
19,683 of goodwill. The customer related intangibles will be amortized over their estimated useful lives averaging nine years. The
purchase price relating to the interest acquired from NNIF&H B.V. has been presented as a decrease of
31,017 in additional paid-in
capital of Nortel Networks S.A. as this interest in Nortel Networks France has already been included in the financial statement
presentation for all periods (see note 2).
Divestitures
E
ADS Telecom
On July 18, 2003, Nortel Networks and its subsidiaries exercised the call option and share exchange rights to acquire the minority interest
held by EADS of 42 percent in Nortel Networks Germany GmbH & Co. KG (“NNG”) and to sell Nortel Networks equity interest of
41 percent in EADS Telecom to EADS. These transactions were completed on September 18, 2003 along with the purchase of Nortel
Networks France. Nortel Networks S.A. held an aggregate interest in EADS Telecom of 15 percent or 259,969 shares as of that date.
During that period, Nortel Networks S.A. sold 215,170 shares of EADS Telecom to NNIF&H B.V. for
48,783. The resulting gain from
this related party transaction of
35,648 has been recorded as additional paid-in capital. Nortel Networks S.A. also sold 44,799 shares of
EADS Telecom directly to EADS for
10,157 in cash. As this transaction was part of a greater transaction between Nortel Networks S.A.
affiliates and EADS, the resulting gain of
7,422 has also been recorded as paid in capital.
On May 29, 2001, Nortel Networks France contributed certain of its enterprise activities to EADS Telecom in exchange for shares of
EADS Telecom. The activities that were contributed were assessed to be approximately 8 percent of the value of Nortel Networks France
before the contribution. The fair value of the net assets contributed to EADS Telecom was estimated to be
73,480. The contribution
included the full ownership of five foreign subsidiaries of Nortel Networks France. The contribution was effective as of May 1, 2001. A
gain of
14,262 was recorded on that transaction.
Subsequent to the contribution, Nortel Networks France transferred the shares received from EADS Telecom in consideration for the
contribution to its shareholders as an in-kind dividend.
M
atra Nortel Communication Distribution
On September 30, 2001, Nortel Networks France sold 80.1% of its participation in its subsidiary, Matra Nortel Communication
Distribution S.A.S. (“MNCD”), to third parties for
30,032 in cash. Cash has been collected in 2002 and 2001, respectively for 9,909
and
20,123. MNCD was the main distribution channel of Nortel Networks France and EADS Telecom in France. A gain of 16,240 was
recorded on that transaction.
Following the sale of MNCD, Nortel Networks France subscribed on December 10, 2002 for 249,000 common shares of SPIE
Communication (formerly MNCD) at par for an amount of
2,490. The additional subscription represented 15.33 percent of the share
capital of SPIE Communication. 199,449 of the new shares of SPIE Communication subscribed by Nortel Networks France representing
12.28 percent of the share capital of SPIE Communication were sold on the same day to third parties for nil. A loss of
1,995 was
recorded on that transaction. Nortel Networks France had entered into the transaction as part of the commitment taken in favour of the
purchasers of MNCD (see note 13).
The remaining 3.05 percent interest of Nortel Networks France in SPIE Communication was sold on June 30, 2003 to third parties for an
amount of
915incash.Againof 610 was recorded on that transaction.
Nortel Networks France also granted in the year ended December 31, 2002 a loan amounting to
9,146 to SPIE Communication. The
loan was refunded in the year ended December 31, 2003.