JDSU and SDLI Delay Merger, Again

Industry watchers speculate that JDSU's rumored sale of its Zurich plant to Nortel is the cause of the delay

January 24, 2001

2 Min Read
JDSU and SDLI Delay Merger, Again

Investors following the merger between JDS Uniphase Inc. (Nasdaq: JDSU) and SDL Inc. (Nasdaq: SDLI) will have to wait a little longer for the final word (see JDSU, SDL Delay Merger).

The two companies announced late this afternoon that they are postponing their special stockholders meeting scheduled for this Friday until February 12, 2001.

Why another delay? JDSU has submitted a proposed remedy to the United States Department of Justice (DOJ) in response to concerns raised by review of the proposed merger, and the Department needs more time to make its final decision, according to the press release.

While JDSU is keeping quiet about the remedy, it most likely concerns the company’s plans to sell its 980-nanometer pump laser facility in Zurich, Switzerland (see Who Gets a JDSU Jewel?). Last week Bloomberg reported that Nortel Networks Corp. (NYSE/Toronto: NT) was close to sealing a deal for the plant worth approximately $3 billion.

“Since day one we’ve said that the sale of the Zurich plant is the most obvious area of overlap,” says Joseph Wolf, an analyst with UBS Warburg. “I’d be surprised if the remedy didn’t have something to do with it.”

Neither company has made a formal announcement, but some believe that other big players like Corning Inc. (NYSE: GLW) or Furukawa Electric Co. Ltd. may not be entirely out of the running just yet.

“Nortel may be the front runner, but there are a number of other potential bidders,” adds Wolf.

Regardless of the delay, analysts are still optimistic that the deal will go through.

“The market isn’t responding negatively if you judge by the arbitrage spread,” says Wolf. “It doesn’t look like it’s widening, so that means investors are still positive.”

Even though both companies finished down today and continued to lose in after hours trading, they lost approximately the same percentage of value. JDSU closed at $63 a share and was trading at $58.75 down roughly 6.7 percent, while SDLI closed at $232 and was down 7.5 percent to $214.5. After-hours quotes are from Island ECN.

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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