NEW YORK (CNNfn) - Fiber-optic lines leader Corning Inc. agreed Wednesday to purchase the optical cable business of German partner Siemens AG for $1.4 billion in stock, debt and other fees.|
Corning, N.Y.-based Corning (GLW) which saw its stock soar 62 percent since mid-October, will also buy Siemens’ one-half ownership of the fiber-optic-cable makers, Siecor Corp. and Siecor GmbH, two joint ventures that they formed 22 years ago.
For Corning - which makes fiber-optic lines that are key to building telecommunications infrastructures -- the deal for Siecor will give it manufacturing control of the cables that protect fiber-optic lines when they are placed in the ground, especially in Europe.
Corning holds about a 50 percent share of the global fiber-optic market currently, and about an 80 percent share of the market for high-end fiber-optic lines, analysts said. Its customers include the regional Bell operating companies, among others.
Shares of Corning, which had sales of $3.5 billion last year, rose 2-1/4 to 107-1/2 late Wednesday. Siemens (FSIE) shares fell 1.2 percent to 11.94 euros in Frankfurt Wednesday afternoon.
For its part, Siemens, a Munich, Germany-based conglomerate that makes everything from cellular phones to high-speed trains, the deal is the latest asset disposal under a broad restructuring aimed at narrowing its focus.
Corning gets a worldwide operation employing about 3,300 people and with annual sales of about $785 million. The transfer is expected to take place at the end of the first quarter, pending regulatory approvals.
Under the deal, Corning will acquire 16 divisions, including five in Germany, four in other European countries and seven production facilities in Egypt, India, Vietnam, Indonesia, China, Australia, and Argentina.
The price includes $145 million in performance payments to be paid, if earned, over a four-year period, and some $120 million in assumed debt.
Analysts said they saw the deal coming.
"It hasn’t been one of the best-kept secrets in the world,” said Donaldson, Lufkin & Jenrette analyst Mark Hassenberg, who has a "buy” rating on the shares of Corning.
"They telegraphed it, it was no surprise,” Kevin Slocum, an analyst at SoundView Financial Group who has a "strong buy” rating on Corning stock. "It is a natural for this property to fall 100 percent under Corning’s control.”
"Siemens is all over the place but starting to become more focused. In the decision process [Siemens] said that ‘it’s probably more of a core business for Corning than core for us,’” he added.
Corning expects the buyout to reduce its earnings per share by 5 percent in fiscal 2000, but boost its income after that.
During a conference call with analysts Wednesday, Corning said it expects revenue to rise by about $700 million a year, the bulk of which relates to fiber-optic cable, Slocum said.
Charles Willhoit, an analyst at J.P. Morgan, said Corning will gain a fiber-optic production facility in Europe that will help to offset a massive backlog in orders it is facing. He said Corning’s backlog now extends into the middle of 2001, meaning it can’t fill any new orders until, at least, then.
--from staff and wire reports