Via Yahoo Alcatel Will Complain About JDS Uniphase's E-Tek Buy (Update1)
3/22/00 10:43:00 AM
Source: Bloomberg News
Paris, March 22 (Bloomberg) -- Alcatel SA, Europe's No. 2 phone-equipment
maker, said it will complain to U.S. antitrust enforcers that JDS Uniphase Corp.
will have the power to raise prices if the biggest maker of fiber-optic components
is allowed to buy rival E-Tek Dynamics Inc.
JDS Uniphase agreed in January to buy E-Tek in a transaction now valued at
$19.7 billion. The U.S. Department of Justice is scrutinizing the proposal and
interviewing customers of both companies to determine whether the acquisition
would hurt competition in the market for parts that boost the capacity of
fiber-optic networks.
Alcatel, E-Tek's No. 1 customer, wants the acquisition delayed until it can find
another source of components, said Alcatel USA Vice President of Product
Strategy Paul Harrison. That process that could take as long as a year, he said.
'On some components there are no other suppliers,' Harrison said. 'We don't want
to get into a situation where there's only a single supplier.'
Complaints by big customers like Alcatel 'bode ill for the deal,' said Steven
Newborn, a Washington antitrust attorney with Clifford Chance, Rogers and
Wells. 'If I were betting, this would not go through' unless JDS Uniphase and
E-Tek could negotiate a long-term supply contract 'that keeps them for a year as
happy as they could possibly be,' he said.
Alcatel fears that JDS Uniphase will increase prices of some products once it
completes the purchase. Currently, Alcatel can pressure the companies -- its two
biggest suppliers of the parts - - to keep prices down by offering more business to
one than the other. E-Tek got a third of its $72.5 million in sales from Alcatel in
its fiscal second quarter, which ended Jan. 1.
Widened Spread
Alcatel, based in Paris, is the biggest maker of fiber-optic transmission systems
used to send large amounts of phone and data traffic back and forth undersea. It
also makes systems for land networks and plans to double its sales of those
products in North America to $400 million this year, targeting phone companies
such as MCI WorldCom Inc., Sprint Corp., Qwest Communications International
Inc. and Level 3 Communications Inc.
The spread between the value of JDS Uniphase's offer for each share of E-Tek
stock and the trading price of an E-Tek share has widened to $53.80 from $28.77
Monday, an indication of market uncertainty about the transaction's prospects for
getting antitrust clearance. JDS Uniphase shares rose 3 to 130 in early afternoon
trading. E-Tek rose 4 to 234.
Harrison said he hasn't been contacted by Justice Department investigators and
didn't know if other Alcatel officials had been interviewed by phone or in person.
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