Capstan Communications has welcomed Ericsson's $242m acquisition of Nortel's stake in LG-Nortel, and according to Gordon Smythe, MD of the joint venture's UK distributor, the transaction signals a new era of high optimism. He stated: "Today's announcement is greeted with huge optimism and we remain committed to working with the joint venture."
Ericsson's share purchase agreement to acquire Nortel's majority shareholding (50%+1 share) in LG-Nortel - the joint venture of LG Electronics and Nortel Networks - will have little short-term impact on UK resellers, Smythe observed. "But they can look forward to positive benefits in the long-term," he added.
The new entity will be known as LG-Ericsson and remains headquartered in Seoul, Republic of Korea, and aims to become one of the major global converged voice & data manufacturers, leveraging its international distributors' local knowledge and channel management. In 2009, LG-Nortel generated approximately $650 million of sales.
This acquisition will significantly expand Ericsson's footprint in the Korean market and provide Ericsson with a well established sales channel and strong R&D capability in the country. The purchase price of $242 million is on a cash and debt free basis and there are no plans to reduce the company's 1300 strong workforce. The transaction is subject to customary regulatory approvals.
Yong Nam, Vice Chairman and CEO of LG Electronics, commented: "Ericsson will provide global industry experience and technical expertise that will benefit both customers and employees. We look forward to a fruitful future collaboration."
Jae Ryung Lee, CEO of LG-Nortel, noted: "LG-Ericsson is expected to provide the Korean market with leading technology and customer supports in cooperation with Ericsson's global leadership in telecommunication market. We are excited by the new perspective for our company."