Apple Inc. (AAPL) and Microsoft Corp. (MSFT), in a joint venture called Rockstar Bidco LP, won court permission to buy the patent portfolio of Nortel Networks Corp. for $4.5 billion after outbidding Google Inc. (GOOG) in the biggest patent auction in history.
In a joint hearing today, U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, and Ontario Superior Court Judge Geoffrey Morawetz in Toronto approved the sale of more than 6,000 patents and applications related to wireless and Internet technology.
“This truly is a ‘wow’ transaction,” said David H. Botter, an attorney for the main committee of Nortel’s unsecured U.S. creditors.
After Nortel filed for bankruptcy in 2009, it began selling its businesses, raising about $3 billion before the June patent auction. The patent portfolio was the last major asset Nortel had to sell, and will boost creditor recoveries. The sale should close within 30 days, Lisa Schweitzer, a bankruptcy attorney for Nortel said in court today.
The auction, held June 27 to June 30, involved 19 rounds of bidding and began with an opening bid from Intel Corp. (INTC), Schweitzer said. Before the auction, Google signed a contract to be the so-called stalking-horse bidder with a guaranteed offer of $900 million.
That offer, which entitles the Internet search company to a breakup fee of $25 million plus expenses, was exceeded by Intel when the auction started and then followed by more offers, some in writing, some made orally, Schweitzer said.
Three companies and two groups competed in the first round of bidding: Apple, Google, Intel, the initial Rockstar group that didn’t include Apple, and Norpax LLC, a group led by patent-buying company RPX Corp., according to court records filed in Toronto.
The minimum increase in the bids rose from $5 million to $100 million after the second round of bids. After five rounds of bidding, Apple joined Microsoft as part of the Rockstar bid and Intel dropped out, according to Canadian court records.
Google and Intel joined forces after eight rounds of bidding and together stayed in the auction until the 19th round, which was won by the Rockstar group.
Nortel’s bonds climbed after the auction results were announced, with some selling for more than 100 cents on the dollar. Nortel’s $450 million of 10.75 percent bonds that mature in July 2016 closed today at 108.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s down slightly from its close on July 8, when bonds hit almost 109 cents on the dollar, their highest close since the company sold the debt in January 2008.
Nortel’s 6 7/8 bonds due in 2023 fell 5.45 percent today to 73.75 cents on the dollar, according to Trace. On July 1, the day that Nortel announced the auction results, the bonds more than doubled, from 33 cents on the dollar to 69 cents on the dollar.
The bankruptcy case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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