JDS Uniphase sells Zurich subsidiary to Nortel Networks; Department of Justice permits merger between JDS Uniphase and SDL

by Mardi Balgochian Scalise

Nortel Networks Corporation [NYSE/TSE: NT] announced a definitive agreement whereby it will acquire JDS Uniphase's Zurich, Switzerland-based subsidiary, as well as related assets in Poughkeepsie, New York. The Zurich-based subsidiary designs and manufactures strategic 980 nanometer pump-laser chips. Nortel Networks will pay $2.5 billion in its common shares on closing, as well as up to an estimated additional $500 million in its common shares after December 31, 2003 to the extent it does not meet certain purchase commitments from JDS Uniphase by that date.

This announcement was made the same day that JDS Uniphase Corporation (NASDAQ: JDSU; TSE: JDU) and SDL, Inc. (NASDAQ: SDLI) announced that the United States Department of Justice will permit the merger between these two companies in light of JDS Uniphase's agreement to sell its Zurich subsidiary to Nortel Networks. The JDS-SDL merger now remains subject only to the approval of JDS Uniphase and SDL stockholders, pursuant to stockholder meetings set for February 12, 2001, and the closing of the sale of the Zurich subsidiary to Nortel Networks. JDS Uniphase and SDL expect to close the merger shortly after obtaining the required stockholder approvals.

With Nortel's acquisition of JDS Uniphase's Zurich, Switzerland-based subsidiary and related assets, Nortel Networks will gain a principal plant for designing and manufacturing large volumes of 980 nanometer pump-laser chips, which are essential to creating the all-optical Internet. 980 nanometer pump-laser chips provide the energy source by which light is strengthened as it is transmitted on fiber between cities or buildings. The acquisition will accelerate Nortel Networks' ability to integrate this technology and associated intellectual property into its high-value optical amplifier modules used to boost and amplify light in dense wave division multiplexing (DWDM) networks. These modules are used by both Nortel Networks and its customers. The Zurich-based subsidiary currently supplies 980 nanometer pump-laser chips to prominent optical component manufacturers. Upon completion of the acquisition, Nortel Networks fully expects to continue and enhance the relationships that this business has with these valuable customers.

Upon completion of the transaction, the Zurich-based subsidiary of JDS Uniphase will become an indirect, wholly owned subsidiary of Nortel Networks Corporation. Employees will continue to be located in Zurich, Switzerland and in Poughkeepsie, New York. Stephen Reilly, general manager of the Zurich-based subsidiary, will continue to lead the Zurich team, reporting to Liam Nagle, vice president of operations, High-Performance Optical Component Solutions, Nortel Networks.

Nortel Networks' High-Performance Optical Component Solutions business is a large and quickly growing optical component and module business that designs, develops and manufactures high-value modules for the Optical Internet, including those for 10 and 40 gigabits per second systems. It has estimated pro forma 2000 revenues of $2.425 billion based on market prices and approximately 8,900 employees and contractors located primarily in Harlow and Paignton, United Kingdom; Ottawa, Ontario; Boston, Mass. and Raleigh, NC; and Sydney, Australia.

The boards of directors of both Nortel Networks and JDS Uniphase have approved the transaction, which is expected to close in the first quarter of 2001. The completion of the transaction is subject to customary closing conditions and the closing of the JDS Uniphase/SDL, Inc. merger. The transaction is not subject to further competition regulatory review or approval. Credit Suisse First Boston Technology Group acted as financial advisor to Nortel Networks for this transaction and CIBC World Markets represented JDS Uniphase on the sale of its Zurich-based subsidiary.

The acquisition (excluding acquisition related costs) is expected to be neutral in calendar year 2001 to Nortel Networks earnings per share from operations. Based on a $38.08 price per Nortel Networks common share, the transaction will result in Nortel Networks issuing approximately 65.7 million common shares on closing and up to approximately 13.1 million common shares in deferred consideration. The deferred consideration will only be paid to the extent that Nortel Networks does not meet its purchase commitments with JDS Uniphase by December 31, 2003. The number of Nortel Networks common shares that may be issued as deferred consideration will be based on the share price at the time it becomes payable, subject to a minimum of approximately 10.9 million and a maximum of approximately 16.4 million Nortel Networks common shares. In addition, Nortel Networks and JDS Uniphase will enter into certain other purchase and supply contracts with each other that are intended to enhance the business relationship between both parties.

About Nortel Networks:

Nortel Networks is a global Internet and communications provider with capabilities spanning Optical, Wireless, Local, Personal Internet and eBusiness. The Company serves carrier, service provider and enterprise customers globally. For more information, visit www.nortelnetworks.com.

About JDS Uniphase:

JDS Uniphase, headquartered in Ottawa, Ontario and San Jose, Calif., designs, develops, manufactures and distributes a comprehensive range of products for the growing fiber optic communications market. These products are deployed by system manufacturers worldwide to develop advanced optical networks for the telecommunications and cable television industries. For more information, visit www.jdsuniphase.com.

About SDL:

SDL's products power the transmission of data, voice and Internet information over fiber optic networks to meet the needs of telecommunications, data transmission, dense wavelength division multiplexing (DWDM) and cable television applications. For more information, visit www.sdli.com.