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Optical/IP

Alcatel Offloads Optical Fiber Biz

In its ongoing bid to find new homes for underperforming business assets, Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has hooked up with Dutch firm Draka Holding NV (Amsterdam: DRAK.AS) to form an optical cable joint venture (see Alcatel, Draka Form Joint Venture).

Alcatel will hold 49.9 percent of the new venture, and Draka the remaining stake. The French vendor's management had hinted at an impending deal during the company's financial results announcement last week (see Alcatel Close to Fiber Optics Deal). The new venture, which will include optical fiber and copper cable activities, is due to begin operations on July 1.

While Alcatel declined to provide any further details, the Dutch firm says the new joint venture will have annual revenues of €670 million (US$855 million), with Draka contributing €390 million and Alcatel's optical fiber business €280 million. The companies claim the new venture will be profitable in 2005.

If the two businesses had been combined at the end of 2003 they would have had a total of 3,900 employees, according to Draka, though it's unclear what the staffing level will be come July 1.

Alcatel announced last week that it is due to shed a further 6,000 staff in 2004, with any employees involved in mergers or acquisitions counting towards that total.

The new partners claim their joint venture will be the market leader in fiber and fiber cable in Europe and China, once Alcatel's business is combined with Draka's 37.5 percent holding in the Yangtze Optical Fibre & Cable Co.

Alcatel's share price was up €0.36 ($0.46) on the Paris exchange this morning at €12.35 ($15.74), compared with yesterday's closing price of €12.19 ($15.53).

While the Draka deal answers any current questions about Alcatel's future in the optical cable market, it leaves Nexans, which had been bidding for the Alcatel business, at a loose end. The vendor, in which Alcatel still holds a 15 percent stake, had suggested previously that if its bid was unsuccessful it would look for another acquisition target. Nexans had not responded to questions about alternative targets as this article was published.

— Ray Le Maistre, International Editor, Boardwatch

whyiswhy 12/5/2012 | 2:28:37 AM
re: Alcatel Offloads Optical Fiber Biz Because the whole purpose of creating the holding company was to make it possible for Alcatel to dump the workers and factories, and thus cut expenses.

With 15% of Nexans already French owned, any Alcatel-Nexans deal would have tripped the balance of ownership to Alcatel, and that would re-trigger all the employee-rights issues.

This way, Le Guillotine can drop and chop! Alcatel retains maximum ownership while avoiding the French laws re layoffs and plant shutdowns.

-Why
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