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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: zbyslaw owczarczyk who wrote (9288)	1/16/2001 11:47:34 PM
From: Kenneth E. Phillipps	Read Replies (2) \| Respond to of 14638

01/16 20:08 JDS Is in Talks to Sell Plant to Nortel, People Say (Update1) By Erik Schatzker San Jose, California, Jan. 16 (Bloomberg) -- JDS Uniphase Corp., the biggest maker of fiber-optic components, is in talks to sell a Swiss factory to Nortel Networks Corp. for about $3 billion to gain U.S. antitrust clearance for its acquisition of rival SDL Inc., people familiar with the negotiations said. While the companies have outlined a sale agreement, some issues are unresolved, the people said. Reconciling those differences and getting a transaction approved by the U.S. Justice Department may delay the purchase until mid-February, they said. JDS Uniphase is selling the plant in Zurich, Switzerland, to satisfy U.S. regulators, who insist on the divestiture to preserve competition in the market for telecommunications lasers, the people said. Nortel wants to acquire the factory to strengthen a components unit in which it plans to sell shares, they said. ``How to deal with Zurich has always been the sticking point in the merger,'' said portfolio manager Giri Devulapally of T. Rowe Price Associates, a holder of both JDS Uniphase and SDL shares. The plant makes 980-nanometer pump lasers, a type of device that amplifies signals in fiber networks. JDS bought it from International Business Machines Corp. for $45 million in 1997. The company then constructed a new building and purchased new manufacturing gear, increasing sales and boosting the value. Transaction Value JDS in July agreed to acquire SDL in a stock transaction now valued at $16.9 billion, down from an initial $41 billion. It postponed a shareholder vote to approve the purchase until Jan. 26 and probably will have to reschedule it again, one person said. Nortel spokesman Andy Lark declined to comment on the negotiations. JDS officials couldn't be reached for comment. Justice Department spokeswoman Jennifer Rose also declined to comment. The outlined agreement calls for Nortel to pay mostly shares to acquire the Zurich plant, the people said. Nortel, the biggest maker of fiber-optic equipment, also is prepared to increase spending on JDS products as part of the agreement, they said. ``Even though selling to Nortel means helping a competitor, it also strengthens a relationship with a very important customer,'' Devulapally said. Nortel is one of JDS Uniphase's top three customers. While the companies negotiate, the Justice Department is requesting documents and scrutinizing the proposed terms for antitrust concerns, the people said. Nortel already is among the biggest makers of fiber-optic components and would increase its share of that market by purchasing the Swiss factory. To ensure that regulators approve the divestiture, the companies are including language in the agreement that explains how the factory will stay competitive with Nortel as the owner, the people said. Market Share Without a divestiture, San Jose, California-based JDS would double its share of the market for 980-nanometer pump lasers to about 80 percent. That's a level that antitrust regulators find objectionable, the people said. JDS Uniphase wants to keep the factories in San Jose and Santa Clara, California, where SDL makes a powerful version of the lasers that some customers prefer, the people said. It had planned to complete the acquisition by the end of 2000, though negotiations with antitrust regulators and bidders on the plant up for sale dragged on longer than expected, one person said. If the Justice Department does approve the Zurich plant sale, JDS probably will get clearance to acquire SDL shortly afterward, the person said. Stock Sale Nortel plans to sell about 15 percent of its components business in an initial public offering this year. To become the favored bidder on the Zurich factory, the Brampton, Ontario-based company beat out competing proposals from Furukawa Electric Co. and Corning Inc., the people said. Furukawa, which owns about 11 percent of JDS shares, never held talks to acquire the plant, spokesman Osamu Suzuki said. ``It would have been an ideal situation if Furukawa were paying with the JDS stock they own,'' Devulapally said. Corning officials couldn't be reached immediately for comment. ©2001 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks. quote.bloomberg.com