JDS Agrees to Sell Plant in Deal for SDL

JDS Uniphase Corp. got the long-awaited green light from the U.S. Justice Department Tuesday for its $18.3-billion acquisition of SDL Inc. after agreeing to sell a Swiss laser plant to Nortel Networks Corp. for up to $3 billion.

The stock purchase of SDL--which was valued at $41 billion when announced last July amid a bullish market--further strengthens JDS’ lead in the red-hot optical components sector.

JDS is the world’s No. 1 supplier of components used to cram more information into fiber-optic telecommunications networks and move it more quickly, while SDL is No. 2 in the industry.

Shareholders are to vote on the deal Monday, and JDS said it would release the combined company’s earnings and revenue forecasts for the current quarter and fiscal year Monday or Tuesday.

Investors breathed a collective sigh of relief on news of the deal, sending shares of JDS up more than 3%, while SDL added 6%.

The transaction won approval only after JDS agreed to sell a key laser manufacturing plant in Zurich to allay concerns of market domination by the JDS-SDL combination.

The plant, along with related assets in Poughkeepsie, N.Y., was sold to Nortel, the world’s top supplier of optical system equipment and a voracious consumer of components used in those systems.

Several firms wanted to buy the plant, but JDS said it agreed to Nortel’s bid because it was the plant’s biggest customer and had agreed to expand its purchase deals with JDS.

Nortel will pay $2.5 billion when the deal closes and as much as $500 million more after Dec. 31, 2003, if it does not meet purchase commitments to JDS by that date.

Nortel plans to spin off a portion of its components business as a public company this summer.

The Zurich plant controls about 40% of the market for 980-nanometer pump lasers, a technology that amplifies the light signals that travel down fiber-optic networks. In combination with SDL, JDS would have controlled more than 80% of that market before the plant sale, the Justice Department said.

The purchase of SDL, which marks the latest and largest push in JDS Uniphase’s acquisition drive, adds what are considered superior 980 chips to JDS’ arsenal.

JDS Uniphase has expanded through a string of acquisitions after being formed by the $6.1-billion merger of California’s Uniphase Corp. and Canada’s JDS Fitel in June 1999. Its largest deal until now was the $17.4-billion purchase of E-Tek Dynamics Inc. in January 2000.

Despite relatively modest revenues, SDL was viewed as an optical crown jewel because it represented the largest major independent supplier up for grabs in a consolidating market.

SDL, which has plants at its headquarters in Santa Clara, Calif., and in Canada, had revenue of $505 million in fiscal 2000. JDS, with 16 manufacturing plants, posted annual revenue of $1.4 billion.

JDS shares rose $1.81 to close at $51.81, while SDL surged $11.13 to $196.50, both on Nasdaq. Nortel was off 25 cents at $35.51 on the New York Stock Exchange.