JDS Uniphase to Acquire SDL for $37 Billion

Acquisitive JDS Uniphase Corp., trying to meet booming global demand for fiber-optic equipment, said today it was snapping up SDL Inc. for about $36 billion in stock, beating out rivals to forge the largest takeover of a technology equipment maker on record.

The acquisition was originally valued at $41 billion when the companies announced it early today, before investors sent shares of JDS Uniphase down 13 percent.

JDS Uniphase only last month completed the purchase of E-Tek Dynamics, which also makes fiber-optic network equipment, for $15 billion.

JDS Uniphase and SDL each manufacture products needed for high-capacity fiber-optic networks, which allow for increased telecommunications traffic. Demand for such products is growing as high-speed audio and video transmission become more prevalent on the Internet.

Under the terms of the deal announced today, each share of SDL will be exchanged for 3.8 shares of JDS Uniphase. At Friday’s closing prices, that would represent a 49 percent premium for SDL shareholders.

Investors reacted by pushing shares of JDS Uniphase down $15.063 to $101.125 in trading on the Nasdaq Stock Market, while shares of SDL rose $25.375 to $320.688.

An Internet Play

“This combination brings together world-class technical and manufacturing teams that promise to deliver best-in-class products at increased volumes for today’s systems while developing solutions for tomorrow,” said SDL chief executive Don Scifres.

“We also expect to enable the migration from today’s hybrid integration and module level products to tomorrow’s truly integrated system on a chip,” he added.

SDL makes optical equipment for fiber-optic networks to carry exploding volumes of Internet traffic. The phenomenal growth of this market has already created market stars like Cisco Systems and Nortel Networks Corp.

Said JDS CEO Jozef Straus: “By now we all know that the Internet is taking over the world and what that means about the need for bandwidth. Optical is clearly the only solution and our customers are building tomorrow’s systems, need higher levels of integration and more complex products every day.”

Approvals Required for Deal

The union is expected to close by December, pending shareholder and regulatory okays, including key U.S. Justice Department approval, JDS said.

The Justice Department asked for further details when JDS bid in January for E-Tek Dynamics, but the deal ultimately won approval.

“I believe that this is a transaction that will serve customers well and we believe that the regulatory authorities will come to that conclusion, although we can’t predict the timing in a regulatory review situation,” said Anthony Muller, JDS’s chief financial officer in a telephone interview.

After the deal is completed, SDL will operate as a wholly owned subsidiary of JDS Uniphase.

San Jose, Calif.-based SDL, which has about 1,700 employees, earned $14 million on revenue of $72 million in the three months ended March 31. JDS Uniphase, with offices in San Jose and Nepean, Ontario, has about 17,000 employees. During the first quarter of 2000, it lost $241 million on revenue of $395 million.

JDS is one of the biggest of a tier of so-called “merchants” or independent component manufacturers that serve and compete against companies such as U.S.-based Lucent Technologies, Canada’s Nortel and France’s Alcatel, which in turn supply telecoms companies. The Associated Press and Reuters contributed to this report.