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Optical components

Prysmian Lands Draka for $1.15B

More than a year after they failed to agree merger terms, European fiber-makers Prysmian SpA and Draka Holding NV (Amsterdam: DRAK.AS) have struck an €840 million (US$1.15 billion) deal that will create a global cables giant with annual sales of €5.8 billion ($8 billion). (See Prysmian to Buy Draka.)

The Draka board, and the company's largest investor, have accepted Prysmian's cash and stock offer of €17.20 per share, which represents a significant premium over Draka's recent share price. Prysmian, which believes it can achieve annual operating cost savings of more than €100 million ($137 million) within three years of the deal closing, expects the acquisition to close in the second quarter of 2011. Prysmian estimates that about 20 percent of the combined company's business would come from the telecom sector, while other vertical sectors (utilities, general industrial) account for the bulk.

But Prysmian has a rival for Draka's hand in the form of Nexans , which made an unsolicited offer of €15 per share offer for Draka on October 18.

For now, at least, Prysmian is in the driving seat, as Draka today formally rejected the Nexans offer, which it had previously denounced as "inadequate." (See Draka Rejects Nexans Offer.)

Draka's share price is up 9.3 percent to €16.87 on the Euronext exchange this morning, but Italian firm Prysmian saw its share price dip by 2.3 percent to €12.74 on the Milan stock exchange.

Why this matters
It's been obvious for a while that significant economies of scale are needed in the cable and optical fibers market, which is why Prysmian and Draka first explored a merger last year. (See FTTH Firms Eye Merger.)

Now they've overcome their differences and plan to create a company with more than 20,000 staff and operations in more than 50 countries. That would make it the largest supplier of telecom cables and fibers in the world, and a very important potential partner for network operators building out new transport and fiber access networks.

Nexans, meanwhile, is left licking its wounds, without the potential economic benefits that come from a much larger operation.

But the door is still open for Nexans. Draka says it can terminate the deal with Prysmian if a rival offer is made that is deemed "more beneficial" and which includes a per-share price at least 15 percent better than the Italian firm's bid.

For more
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— Ray Le Maistre, International Managing Editor, Light Reading

spc_markl 12/5/2012 | 4:17:49 PM
re: Prysmian Lands Draka for $1.15B

With relatively low margins, as with the ADC/Tyco merger, it is all about volume and diversity of product line in the connector business.


Mark Lutkowitz, Telecom Pragmatics

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