An official report on the Nortel auction proceedings was submitted to the Canadian bankruptcy court by the appointed monitor, Ernst & Young. (Seventy-First Report, dated July 6,2011). The following abstracts are from the initial narrative comments of the monitor’s 322 page filing.
BIDDING PROCEDURES AND THE AUCTION 17. Subsequent to this Honourable Court’s approval of the Bidding Procedures and prior to the Bid Deadline, Nortel and/or its financial advisor, Lazard Frères & Co. LLC (“Lazard”), contacted 98 parties likely to be interested and able to acquire the Residual IP. Five interested parties executed supplemental confidentiality agreements, were provided access to the electronic data room, and completed further due diligence on the Residual IP. Ultimately, four parties (in addition to Ranger) indicated their interest in participating in the Auction, were deemed to be Qualified Bidders and submitted bids for the Residual IP. These parties were: (i) Apple Inc. (“Apple”); (ii) Rockstar Bidco, LP (“Rockstar”), a consortium of various technology companies; (iii) Intel Corporation (“Intel”); and (iv) Norpax LLC (“Norpax”), an affiliate of RPX Corporation.
18. In the period up to June 13, 2011, subject to the exclusivity provisions of the Stalking Horse Agreement, the above noted parties: i) were given access to the confidential data room; ii) accessed the data room; iii) engaged legal counsel and other advisors; and iv) participated in meetings and other discussions with management of Nortel and Nortel’s advisors.
23. After consultation with the Monitor and representatives of the Committee, the Bondholder Group and the Joint Administrators, the Sellers determined that the highest or otherwise best starting offer was the bid received from Intel. Accordingly, on June 23, 2011, the Qualified Bidders were informed that this bid had been selected as the Starting Bid pursuant to the Bidding Procedures.
24. The Auction commenced at approximately 9:15 a.m. on June 27, 2011, at the offices of Cleary Gottlieb Steen & Hamilton LLP in New York, New York. In attendance at the Auction were representatives of the Sellers, the Monitor, the five Qualified Bidders, the Committee, the Bondholder Group, the Joint Administrators, and the French Liquidator.
25. The Intel bid was announced as the Starting Bid and the Qualified Bidders were advised that the minimum bid increment was set at $5 million in accordance with the Bidding Procedures. The Qualified Bidders were also advised of certain rules and procedures with respect to the bidding process as set by the Sellers, including the requirement that each Qualified Bidder (other than one that submitted a bid deemed to be the Leading Bid in the immediately preceding round) submit a bid in each round in order to be eligible to continue to submit bids independently in the Auction. The Sellers then adjourned the Auction to allow the other Qualified Bidders time to prepare written bids. During this adjournment, all four of the other Qualified Bidders submitted new bids. Following consultation amongst the Sellers, the Monitor and representatives of the Committee, the Bondholder Group, the Joint Administrators and the French Liquidator, the Auction was re-convened and the Sellers announced a new Leading Bid. The Sellers then asked for a second round of bidding, exercised their discretion (following consultation with the Monitor and representatives of the Committee, the Bondholder Group and the Joint Administrators) to increase the incremental net value threshold for bids to $50 million from the initial threshold of $5 million, and adjourned the Auction again to allow the other Qualified Bidders to prepare revised offers.
26. In the second round of bidding, three bids were received. Norpax did not submit a bid in the second round but elected to remain in attendance at the Auction in accordance with the Bidding Procedures. Following consultation among the relevant Nortel entities and their constituents as noted above, the Auction was reconvened, a new Leading Bid was declared, the incremental net value threshold was increased to $100 million, and the Qualified Bidders were advised that Norpax had not submitted a bid and therefore the number of Qualified Bidders participating in the Auction was reduced to four. The Auction was adjourned again.
27. The Auction continued for a further seventeen rounds of bidding over the course of June 27, 28, 29 and 30, 2011. Rockstar did not submit a bid in the fifth round and in accordance with the Auction rules established by the Sellers was not permitted to submit further independent bids. Accordingly, the number of Qualified Bidders entitled to participate independently in the Auction at the conclusion of round five was reduced to three.
28. Following the fifth round, Apple, with the consent of the Sellers, had discussions with Rockstar regarding potential partnership opportunities. Following these discussions, Apple indicated it wished to partner with Rockstar and adopt Rockstar’s transaction structure (including using Rockstar as the purchaser). The Sellers consented to this proposal and the balance of Apple’s bids at the Auction adopted the Rockstar structure. Following the sixth round of the Auction, Intel indicated it was withdrawing and would not be submitting further independent bids in round seven or in subsequent rounds. At this point, the Sellers gave their consent to the two remaining Qualified Bidders, being Ranger and Apple, to discuss partnering opportunities with those Qualified Bidders who were no longer able to participate independently in the Auction (i.e., Norpax, Rockstar and Intel) upon providing prior written notice to the Sellers, it being understood that the Sellers had to consent to any partnering proposals. Following the eighth round of bidding, Ranger asked for and was granted consent by the Sellers to allow it to partner with Intel on specific conditions as read into the record at the Auction. Apple (in partnership with and using the Rockstar transaction structure) and Ranger exchanged counter-bids in rounds nine through 19 in increments of $100 million dollars. The bidding in these rounds proceeded solely through increases to the cash purchase price (and confirming certain requisite points on the record) as the forms of sale agreement and ancillary transaction documents were substantially comparable from the Sellers’ perspective.
29. In the nineteenth round, Apple (in partnership with Rockstar) presented a bid of $4.5 billion, which bid was declared the Leading Bid. At the beginning of the twentieth round, Ranger requested and was granted an adjournment by the Sellers. The Auction was reconvened at approximately 6:45 pm on June 30, 2011, and Ranger indicated it would not make a further bid. The Sellers adjourned the Auction solely for the purpose of allowing the Sellers and the Purchaser to finalize and execute definitive documentation and the $4.5 billion bid submitted by Apple (in partnership with Rockstar) was declared the Successful Bid.
Note: The full fiilling, is a 322 page download. The monitor’s actual report is the first 22 pages, the balance being a lot of copies of legal exhibits. if interested in can be accessed through the article posted by slocat: