SAN JOSE, Calif. - JDS Uniphase Corp., the largest maker of fiber-optic components, agreed yesterday to buy SDL Inc., a rival maker of lasers that strengthen signals on telecommunications networks, for $41 billion in stock.
The company plans to swap 3.8 shares for each SDL share. The exchange values SDL at $441.51 a share, almost 50 percent more than Friday's close.
JDS is betting that buying SDL, which has developed a laser that's more powerful and reliable than its own product, will help further distance the company from Lucent Technologies Inc. and Corning Inc. The market for fiber-optic parts is set to rise to $23.1 billion in 2003 from $6.7 billion last year, according to researcher RHK Inc.
"This adds substantial technical expertise," said Giri Devulapally, telecommunications-equipment analyst at T. Rowe Price Associates Inc., which owns shares of JDS and SDL. "Some [products] augment what JDS already has, some areas are more cutting edge."
JDS fell $15.0625 to close at $101.125 in trading of 67.2 million shares, making it the most active U.S. stock. SDL rose $25.375 to $320.6875.
"Forty billion bucks is a lot of stock," said Phillip Lamoreaux, managing partner of Lamoreaux Partners, which bought its JDS stake in the initial public offering of Uniphase in 1993. Lamoreaux said the purchase will be a boon to JDS: "You not only add the people and the capacity, but you can block a potential rival."
JDS said SDL will boost its earnings per share when the acquisition closes by year's end, though it expects the U.S. Department of Justice to scrutinize the purchase.
"The whole fiber-optics area is something the government is interested in," said Steven Newborn, an antitrust attorney at Clifford Chance Rogers & Wells in Washington. "This is an entry point for a lot of competitive issues. The government will certainly look at this closely."
The Justice Department declined to comment.
JDS has acquired 17 companies since 1995, including four in the past six months, transforming itself from a tiny maker of gas lasers. The SDL acquisition would be JDS' biggest yet, dwarfing the buyout of E-Tek Dynamics Inc. for $20.4 billion last month.
Shares of JDS have surged more than fivefold since the company snapped up JDS Fitel Inc. a year ago for $7.18 billion. The purchase drew attention to an industry that few investors had considered. JDS Uniphase now is the fourth-biggest stock in the Nasdaq 100 index by market value.
SDL is best known for its pump lasers, tiny semiconductors that generate powerful beams of light. It also competes with JDS in optical amplifiers and laser modulators.