FOCUS-Alcatel (SBF:CGEP) buys Xylan (NASDAQ:XYLN) for $2 bln
ReutersPlus, Tuesday, March 02, 1999 at 04:18
(Adds background, quotes, share prices)
By Crispian Balmer
PARIS, March 2 (Reuters) - French telecommunications firm
Alcatel said on Tuesday it was buying U.S. Internet equipment
maker Xylan Corp for some $2.0 billion to boost its profile in
the rapidly expanding voice and data network business.
Alcatel said in a statement it would make a cash offer of
$37 a share for all outstanding Xylan stock, with the tender
opening on March 8. It added that Xylan's board was recommending
that its shareholders accept the bid.
"Alcatel has devised and is implementing a comprehensive
strategy to become a key worldwide player in the Internet
field," company chairman Serge Tchuruk said in the statement.
"The combined Alcatel/Xylan strengths in voice and data
networking for enterprises will constitute a very powerful force
in world corporate markets," he added.
Xylan shares surged some 39 percent last week on speculation
that Alcatel was set to launch a takeover bid. The stock closed
on Monday up 7/16 at $26-15/16. Alcatel stock dipped 1.68
percent on Monday to close at 98 euros.
Alcatel said completion of the deal was subject to 90
percent of the shares being tendered and compliance with
anti-trust laws.
The California-based Xylan makes high-bandwidth switching
systems and is one of the fastest growing companies in the
enterprise data field, Alcatel said.
"The synergies from combining that technology with Alcatel's
resources will provide a dramatic boost to Xylan's future
success," Xylan's Chief Executive Officer Steve Kim said in a
statement.
Alcatel's move comes as telecommunication companies around
the world scramble to develop their data transmission services
to try to keep pace with the booming Internet market.
Analysts predict that voice calls will soon represent only a
tiny fraction of all telecommunications traffic.
Alcatel has been a key Xylan customer and accounts for a
significant portion of the U.S. firm's business. In all, Xylan
has some 4,000 customers and revenues of around $348 million.
"In each of the last two years, the company has grown
approximately 65 percent, outstripping the growth of the data
networking market," Alcatel said.
It said Xylan would continue to sell through its existing
distribution channels and would become Alcatel's centre of
competence for all data networking projects.
Alcatel, which operates in 130 countries, reported a net
profit of 2.3 billion euros ($2.5 billion) in 1998, boosted by a
two billion euro gain on asset sales, while gross operating
income rose 10.2 percent to one billion euros.
Tuesday's purchase follows a $315 million buy last October
of Packet Engines Inc, another U.S. Internet technology company.
Tchuruk said in January that his company was considering
another "two or three" acquisitions in the United States this
year in Internet technology companies, each in the order of
several hundreds of millions of dollars.
Tchuruk was due to hold a news conference at 1300 GMT.
Alcatel hit the headlines last September when its stock
plummeted 40 percent after issuing a profit warning. The stock
opened up 2.75 percent on Tuesday at 99 euros.
paris.newsroom@reuters.com))
($1=.9185 Euro)
Copyright 1999, Reuters News Service
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