U.S. DoJ opposes Juniper Networks acquisition

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The U.S. Department of Justice is drawing a fat line through HPE’s plans to acquire Juniper Networks. According to the Department, the acquisition tempers competition in the networking industry.

Just two days ago we wrote that the Juniper Networks acquisition was not yet in the works, and now it seems to be in jeopardy altogether. The U.S. Department of Justice (DoJ) announced with a press release that it wants to block the acquisition. According to DoJ officials, a takeover would lead to even more concentration in the industry.

Reduced competition

DOJ cites three arguments to stop the acquisition, which are closely related. First, a merger between two major players in the industry reduces the competitiveness of others. Together, HPE and Juniper Networks would form a superpower that would make it very difficult for competitors such as Cisco. DoJ fears that this concentration of power would be associated with higher prices and less innovation in products.

“HPE and Juniper Networks are successful companies. But instead of continuing to compete as rivals in the WLAN market, they are trying to consolidate – increasing concentration in an already concentrated market. The threat is not theoretical: large segments of the U.S. economy will have to pay more for wireless technology they depend on,” said Omeed Assefi, acting attorney general of the department.

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Moreover, the DoJ believes the acquisition is an attempt by HPE to nip a competitor in the bud. The press release says that, before there was talk of acquisition, there was concern within HPE about Juniper’s “threat”: salespeople from HPE were urged to “finish off” Juniper Networks. So DoJ does not believe the friendship is genuine.

The ruling comes as a surprise, but not actually. Although the EU and the UK had already given the green light for the acquisition, it was clear that the U.S. DOJ would not simply give way. Over the past few months, executives from HPE came over several times to convince the Department to give the green light. Still, a final ruling was not expected until new DOJ head Gail Slater was officially appointed.

High stakes

The ruling draws a big line in HPE’s reckoning. The intention to acquire Juniper Networks for $14 billion, meanwhile, was announced a year ago. HPE showed patience, but always expressed optimism that things will work out. At the HPE Discover event in November, CEO Antonio Neri and his Juniper colleague Rami Rahim were still standing fraternally next to each other on stage.

“We believe that the Justice Department’s analysis of this acquisition is fundamentally flawed. There is extensive evidence showing that this acquisition is pro-competitive and the industry is characterized by robust competition. DOJ’s allegations are largely disconnected from the market,” HPE and Juniper Networks wrote in a joint statement sent out Thursday evening.

So there is a good chance that HPE will appeal the ruling, resulting in a long and complex legal battle. The stakes are high and the outcome will serve as a precedent for future acquisitions.