The sale should help Nortel in its bid to regain profitability and also ensure a continued supply of optical components with which to build products for its customers, the company said in a statement. The deal includes a three-year supply agreement under which Nortel will buy components from Bookham worth at least $120m (£77m) over the first 18 months.
The sale includes Nortel's transmitter and receiver business and its pump laser and amplifiers busines. The assets to be sold include patents, trademarks and other intellectual property.
Around 1,000 employees will have the option to stay on at Bookham "after redundancies are addressed", Nortel said. The company could not immediately be reached for clarification. Existing customer contracts will be assumed by Bookham and designs and manufactures optical components.
The deal is expected to close later this year pending certain European and US regulatory approvals, as well as a vote by the shareholders of Bookham.
Nortel made the sale in exchange for 61 million Bookham common shares, nine million warrants with a strike price of one-third of a penny and debt of $50m (£32m). Bookham Technology will also pay Nortel a $10m (£6.4m) cash reimbursement for related restructuring expenses.
Brian McFadden, president of Nortel's optical networks group said, the transaction was an "important step" in Nortel's path to profitability and its strategy to provide high performance, cost-effective optical network systems for its customers.