MW DOJ's HPE-Juniper lawsuit shows Trump might not be so friendly to tech deals after all

By Therese Poletti

Justice Department sues to block Hewlett Packard Enterprise $14 billion bid to buy Juniper

It turns out that the Trump administration may not be so friendly to tech deals after all.

The U.S. Justice Department filed a lawsuit on Thursday seeking to block Hewlett Packard Enterprise Co.'s $(HPE)$ proposed $14 billion deal to buy Juniper Networks Inc. $(JNPR)$. The DOJ contends the merged company would result in two companies - Cisco Systems Inc. $(CSCO)$ and HPE - controlling more than 70% of the U.S. wireless networking market.

The DOJ is currently headed on an interim basis by acting U.S. Attorney General James McHenry, as President Donald Trump's nominee for the position, Pam Bondi, is in the process of confirmation hearings. Based on the length and the details in the DOJ's 22-page complaint, this case appears to have been in the works for some time. But it's unlikely that McHenry would have continued to pursue it if it did not have the overall backing of the more business-friendly Trump administration.

The two companies have already received approvals from the U.K., the European Union and several other regulatory bodies. They issued a joint statement Thursday, claiming the DOJ's analysis of the proposed deal is "fundamentally flawed." Shares of HPE and Juniper fell on Thursday on the confirmation of the news, which had been rumored earlier this week.

Under the Biden administration, it was mostly the Federal Trade Commission that tangled with Big Tech, with mixed results in pursuing antitrust cases. One tech deal that was called off after the DOJ filed an antitrust complaint was Visa Inc.'s (V) $5.3 billion proposal to buy the fintech software company Plaid in 2021.

Wall Street in general has been expecting that the Trump administration would have a pro-business bent, with its deregulation slant. But Trump's protectionist views could also lead to blocking deals with companies outside the U.S. For example, in his first administration, Trump nixed a deal between Lattice Semiconductor $(LSCC)$ and Chinese-backed Canyon Bridge Partners in 2017.

At least one law firm had cautioned its business clients about some aspects of the incoming Trump administration and its impact on M&A. In a blog post in late November, the Rooney Law firm predicted "Trump's second term will likely intensify antitrust scrutiny, particularly against firms perceived as monopolistic or contrary to Trump's political base." The firm wrote that acquisition opportunities could instead come as the result of forced spin-offs in the sectors of social media, e-commerce and cloud computing.

In the proposed HPE and Juniper merger, the DOJ contends that HPE's Aruba business has been competing for years with Juniper's Mist products, and that HPE had a multi-faceted campaign to "beat Mist."

"The 'Beat Mist' campaign failed. Having failed to beat Juniper's Mist on the merits, HPE seeks to acquire Juniper instead for $14 billion," the DOJ suit alleges. "This proposed acquisition risks substantially lesseningcompetition in a critically important technology market and thus poses the precise threat that the Clayton Act was enacted to prevent."

HPE and Juniper said in their statement that the proposed deal "brings together two complementary networking offerings" and would create a networking player to more effectively compete with global incumbents. They also said there are at least eight alternatives to HPE and Juniper products in the wireless networking market.

Evercore ISI analysts said that HPE has until Oct. 5 as a walk-away date, under which it would be on the hook for an $815 million termination fee. Last year, Bernstein Research analyst Toni Sacconaghi wrote that HPE should instead think about mirroring IBM's $(IBM)$ M&A strategy of deals with faster-growing, smaller companies, instead of a slower-growth company like Juniper. So if the deal ends up falling apart, it could have a silver lining for HPE investors.

But whatever happens with HPE and Juniper, the early message from the Trump administration seems to be clear: Any deals with a hint of market consolidation will get scrutinized very closely - and possibly blocked.

-Therese Poletti

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January 30, 2025 15:45 ET (20:45 GMT)

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