JDS/SDL deal could come under tough scrutiny

17 Jun 2002

JDS Uniphase and SDL are to merge if the USD 41 billion deal is approved by antitrust authorities. The sum represents 100 times SDL's expected sales this year.

JDS's offer of 3.8 JDS shares for one SDL share has been accepted by SDL and will create an "absolutely dominant player", according to Drew Peck of Boston-based analyst SG Cowen. If the deal goes through, the merger is expected to close in December.

SDL is number two in the component market for fibre optic equipment after JDS. One area of concern to the authorities will be the overlap in the 980 nm laser pump chip market.

A few days before the announcement of the JDS/SDL deal, JDS Uniphase won government approval to acquire E-Tek Dynamics in a USD 18.7 billion purchase. E-Tek and JDS Uniphase would have controlled 80% of the world's thin-film filters and antitrust regulators insisted that the two companies cancel certain contracts.

The JDS offer last Monday valued SDL shares at USD 441, nearly 50% up on SDL's closing price the previous Friday. JDS shares fell however on concerns about regulatory approval.

JDS has acquired 17 companies since 1995, four in the past six months including E-Tek Dynamics and Optical Coating Laboratories, cementing the passive component side of its business. The purchase of SDL will bolster the company's active component business. PH