THE US Department of Justice has sued to block Hewlett Packard Enterprise’s US$14 billion deal to acquire networking gear maker Juniper Networks, arguing that it would stifle competition, according to a complaint filed on Thursday.
Shares of both the server maker and Juniper Networks closed about 2 per cent lower. The antitrust lawsuit marks the first since President Donald Trump took office last week.
The DOJ argued that the acquisition would eliminate competition and would lead to only two companies — Cisco Systems and HPE — controlling more than 70 per cent of the US market for networking equipment.
More than a year ago, the server maker said that it would buy Juniper Networks for US$14 billion in an all-cash deal, as it looks to spruce up its artificial intelligence offerings.
“The DOJ’s claim that the WLAN (Wireless Local Area Network) market is composed of three primary players is substantially disconnected from market realities,” the companies said in a joint statement.
The firms added that they would defend the deal, arguing that the acquisition will bring together two complementary networking offerings to better compete with global incumbent players.
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“Juniper has also introduced innovative tools that have materially decreased the cost of operating a wireless network for many customers. This competitive pressure has forced HPE to discount its offerings and invest in its own innovation,” the DOJ said in its complaint.
Stiff competition from Juniper forced HPE to sell its products at a discount and spend to introduce new features under the “Beat Mist” campaign, named after the networking gear company’s rival product, the DOJ wrote.
“HPE and Juniper will undergo its pretrial and trial processes over the next about eight months prior to the absolute walk-away date in October – which we think gives suffice time for a trial to commence,” Evercore ISI analyst Amit Daryanani said.
UK’s Competition and Markets authority and the European Union have cleared the deal. REUTERS
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