The world optical fibre networks remained one of the few very bright lights in the gloom of tech company market performance in 2000, and the most active in deal terms was JDS Uniphase, which acquired two rivals in friendly transactions. As one of the fastest-growing areas in technology, JDS has been at the forefront of taking the opportunities to grow quickly.
The first, and the only one to clear thus far, was its $15.5 billion takeover of E-Tek. The companies knew each other well; the office of Uniphase, which had merged with JDS Fitel in 1999, was just five minutes’ away from E-Tek’s in San Jose. The JDS Fitel-Uniphase deal combined a strong active with a strong passive optical filter company, and E-Tek’s focus is wave division multiplexing filters. “There has been a short supply of WDM filters,” says Ryan Limaye at Goldman Sachs, which took E-Tek public in 1998 and advised on its sale to JDS Uniphase. “They are difficult to make, and E-Tek had done a good job of making its processes as efficient as possible. However by combining with JDS Uniphase that efficiency could be significantly increased to the benefit of their customers.”
As soon as that deal got its regulatory clearance, at the end of June, it was straight on to the next one, SDL, which JDS Uniphase had its eye on for some time. While JDS had made the first move on E-Tek, however, the first mover in this deal was a banker.
Mark Shafir had been co-head of M&A at Thomas Weisel Partners since joining from Merrill Lynch in February, so had not been present for the E-Tek announcement where Thomas Weisel was advising JDS Uniphase. It had been a client of the firm’s CEO, Thom Weisel, since he had taken them public in 1993 in his former life as CEO at Montgomery Securities.
Now Weisel, through Shafir, was on the other side. SDL was a client Shafir had nurtured at Merrill and brought with him, and now he was suggesting to JDS Uniphase’s CEO Josef Strauss that he might want to consider them as his next target. Within nine days of making the call, the deal was announced. Thom Weisel’s old firm, now called Banc of America Securites, was to be JDS’s advisor, along with CIBC World Markets.
Again the rationale for the deal was economies of scale. “This deal highlights the importance of M&A to enhance research and development for technology companies facing elevated demand and shrinking time-to-market windows,” says Shafir.
This second deal is expected to win regulatory approval in the next couple of months.
