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infineon cancels fibre optics sale to finisar UPDATE 1-Infineon cancels fibre optics sale to Finisar
January 11, 2005 4:06am ET (Reuters)

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FRANKFURT, Jan 11 (Reuters) - German chipmaker Infineon has cancelled a deal to sell its fibre optics unit to U.S. peer Finisar after Finisar said it was likely to withdraw its recommendation of the deal to shareholders.

Infineon said in a statement on Tuesday legal delays had meant that the agreement to sell the loss-making unit, which it had planned to complete by the end of January, would probably not have been able to be closed before the end of March.

Under the agreement, Infineon would have received 110 million Finisar shares, valuing the all-stock deal at $206 million at Monday's closing price.

"The significant delay and high uncertainty of closing are expected to result in deterioration of our Fibre Optics business and in potential harm to our customers," Infineon added in a statement.

By 0848 GMT, Infineon shares -- already hit by warnings from peers STMicroelectronics and Advanced Micro Devices -- were down 1.4 percent to 7.85 euros, underperforming a 0.5 percent-lower European technology index .

Infineon and Finisar had already altered the terms of the sale in October, cutting the number of Finisar shares Infineon would receive from the originally agreed 135 million, and sparking fears the German company could book a loss on the sale.

Infineon had at first expected to book a double-digit million-euro (dollar) gain from the deal, which has been delayed repeatedly.

The company said it would assess its legal options to recover damages through arbitration in Germany, and would meanwhile begin restructuring the fibre optics business. End of Story