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Boeing, Hughes deal eyed
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May 26, 2000: 2:56 p.m. ET
European antitrust officials begin in-depth probe into proposed merger
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NEW YORK (CNNfn) - The European Commission launched on Friday a four-month in-depth probe into Boeing's $3.7 billion buyout of Hughes Electronic Corp.'s satellite-making business, delaying final approval of the deal for at least two more months.
The commission, the European Union's antitrust regulatory arm, said its initial review raised concerns that the deal would allow Hughes to induce its satellite customers to favor using launch services from the Seattle-based Boeing (BA: Research, Estimates).
Hughes' Space and Communications division is the world's largest satellite maker, specializing in commercial geostationary satellites, which circle the globe in a fixed orbit at altitudes of about 22,000 miles. Boeing competitors fear the merger would unfairly aid the company's recently rejuvenated rocket business when it came time to pick a launch service provider.
 A Boeing spokesperson did not return calls for comment, however Hughes (GMH: Research, Estimates) spokesman Richard Dore said the probe was not unexpected. The commission had until today to determine whether a more in-depth probe into the deal, announced in January, was needed.
However, Dore conceded the review will make it nearly impossible for the companies to complete their merger this summer, as was originally hoped.
"It's really not unexpected," Dore said. "Every merger goes through this."
Investors did not appear over-concerned. By mid-afternoon Friday, Boeing shares nudged up 3/16 to 38-9/16, while Hughes shares slid 2-1/16 to 94-1/8. However, Hughes shares are now roughly 33 percent off their 52-week high, reached about two months after the Boeing deal was announced.
U.S. regulators also eye deal
The U.S. Federal Trade Commission is also scrutinizing the deal for antitrust concerns and has already asked the companies to provide more information.
The FTC is reportedly speaking with several competitors of the two companies, among them Lockheed Martin Corp. (LMT: Research, Estimates) and European consortium Arianespace, according to Friday's Wall Street Journal.
Boeing already provides rocket-launching services for a majority of U.S. Air Force satellites, a contract it won last year over rival Lockheed Martin (LMT: Research, Estimates).
The FTC is also concerned about the nexus between the companies' satellite and launching services.
"In view of Hughes' current market position in GEO satellites and of the recent development of Boeing's activities in launch services, the commission has therefore identified risks that the acquisition may lead to the creation or strengthening of a dominant position on these markets," the commission said.
 This is not the first time Boeing has run into difficulties with European antitrust regulators. Three years ago, EU and U.S. officials quibbled over European officials' plans to sue Boeing over its planned acquisition of McDonnell Douglas Corp. The matter was resolved when Boeing agreed to discard exclusive agreements it had made to provide commercial aircraft to three U.S. airlines. 
--Reuters contributed to this report
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