TORONTO—Nortel Networks Ltd. said it reached a $1.89 billion settlement agreement for a pair of shareholder class-action lawsuits pending in the Southern district of New York. The company noted that it has also reached an agreement with the plaintiffs in Canadian shareholder class-action lawsuits, which was a condition for settling the U.S. lawsuits.
Nortel said it will pay $575 million in cash along with more than 628 million shares of its common stock, worth about $1.3 billion, toward the settlement. In addition, Nortel agreed to contribute half of any funds collected from former executives the company has sued.
Lawsuits were filed last year as shareholders alleged that they lost money after Nortel restated its financial reports from 2001, 2003 and the first half of 2005 due to accounting errors. In March, the company said its insurers had agreed to put $228.5 million toward its settlement costs after Nortel announced that it had agreed in principle to pay more than $2.4 billion in cash and stock to settle the shareholder lawsuits.
The settlement comes as infrastructure vendors race to partner, merge and buy each other in the face of intense competition in the industry. Many analysts believe Nortel has been left out of the consolidation frenzy because its troubled financial history scared off interested companies, leery of getting involved in costly lawsuit settlements and the struggle to win back the confidence of investors.
Nortel pointed out that, “The settlement contains no admission of wrongdoing by the company or any of the other defendants.”
