JDSU (NASDAQ: JDSU) says that Amada Holdings Co., Ltd., a Japanese company that makes machine tools for metal fabrication, has agreed to buy up to $40 million of preferred stock of a subsidiary of Lumentum Holdings Inc. Lumentum, currently the Communications and Commercial Optical Products (CCOP) business unit of JDSU, will spin out of the company in the third quarter of this year (see "JDSU to split in two" and "JDSU reveals names for post-split companies").

The final amount of Amada's investment will be based on initial trading of Lumentum Holdings Inc. common stock, JDSU says.

Amada has been a JDSU customer for the past eight years. Among its holdings are companies that make laser welders and laser markers.

According to the agreement, Amada will buy from JDSU Series A Preferred Stock in a wholly owned subsidiary of Lumentum Holdings Inc. JDSU provided no details of the subsidiary. No preferred stock will be offered to others, including the public, JDSU says.

The preferred stock may be converted into shares of common stock of Lumentum Holdings Inc. beginning on the second anniversary of the closing of the stock purchase using a conversion price calculated based on a 125% of the volume weighted average price per share of Lumentum Holdings Inc.'s common stock in the five trading days following the spin-off. The transaction is expected to close in the second week following the spin-off.