Nortel Proposes $2.5-Billion Shareholder Settlement

Canadian communications equipment maker Nortel is to pay $2.5 billion to settle two long-running class action lawsuits from shareholders following an accounting scandal that severely damaged its reputation under the

February 8, 2006

1 Min Read
Network Computing logo

LONDON — Canadian communications equipment maker Nortel will pay $2.5 billion to settle two long-running class-action lawsuits by shareholders in response to an accounting scandal under Nortel’s previous management.

The company said Wednesday (Feb.8) it had agreed in principle to pay $575 million in cash and to issue 629 million shares, representing 14.5 percent of its equity.

Based on Nortel’s closing price of $3.02 on Feb. 6, the share settlement would amount to a charge of $1.9 billion.

The deal, agreed to after mediation, follows Nortel’s announcement of revised financial guidance during 2001 and the revision of its 2003 financial results and restatement of other results.

The proposed deal would be part of, and is subject to, the company reaching a global settlement in all pending and proposed shareholder class-action suits. Nortel said talks were continuing on a global settlement."Resolving these important issues will enhance the company’s ability to focus on our transformation and renewal priorities and our customers," said Nortel CEO Mike Zafirovski said in a statement.

Nortel is still under scrutiny by securities regulators in both the U.S. and Canada for accounting irregularities. The probes will continue regardless of whether shareholders accept the settlement.

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like

More Insights