Soaring JDS lands firm in $400M coup
By KEVIN BELL, Ottawa Sun
JDS UNIPHASE Corp., the Microsoft of the fibre-optical world,
got a bit bigger yesterday when it snapped up a New Jersey firm for
a cool $400 million US.
The company announced it is acquiring Epitaxx Inc. to add its
fibre-optic detectors and receivers to JDS's portfolio of products.
The company will pay $400 million in JDS common stock to the
owners of Epitaxx, whose majority holder is a subsidiary of Nippon
Sheet Glass Co.
The deal immediately got the strong approval of investors and
analysts. JDS shares jumped $13, or 7.6%, to close at $183 on the
Toronto Stock Exchange.
Chief executive Kevin Kalkhoven said the acquisition will fill a hole in
JDS Uniphase's product portfolio. But he downplayed the
acquisitions' effect on JDS Uniphase's already spectacular revenue
growth rate of 90%.
Epitaxx's revenues of $40 million will represent just 5% of the
combined company's sales, he said.
"It allows us to maintain the growth rate, but it would be a little bit
unfair to say it accelerates the growth rate," he said.
But Patrick Houghton, an analyst for Sutro & Co., said the deal has
provided an immediate shot in the arm for JDS.
"They have the uncanny way of acquiring companies at the right
time and this may be another case of that."
Houghton said JDS already dominates the market in most fibre-optic
telecommunications products, but was not a market leader in
providing receivers or transmitters capable of sorting out the various
colours at high bandwidth. "And that's what they're buying with
Epitaxx."
JDS stock was trading at about 20 times revenues, and it's buying a
company that is priced at just 10 times revenues, he said. The deal
will cement JDS's place in the fastest growing segment on the
telecommunications business. "I'm surprised they got it so cheap,
frankly," he said.
"This deal should be immediately accretive. I think they're going to
see continued growth."
The merger is expected to close by the end of November as long as
it receives government approval, including a green light from U.S.
anti-trust watchdogs.
JDS Uniphase was dubbed the Microsoft of the optical world last
year when it was formed through the merger of JDS Fitel of Nepean
and Uniphase Corp. of San Jose, Calif. |
