Uniphase, JDS Fitel To Merge
Shares of Uniphase and Canada's JDS Fitel rose Friday after the telecommunications companies reached a $6.1 billion merger deal that would create one of the biggest fiber-optics components makers.
Although the companies are billing the deal as a merger of equals, Uniphase (UNPH) officials are named as the CEO, CFO and CTO slots of the combined company, to be called JDS Uniphase.
The exchange ratio of 0.50855 JDS Fitel (JDS-TC) shares per Uniphase share represents a 2 percent premium over the $60-per-share Thursday closing price of JDS Fitel stock.
Uniphase gained 10 5/8 to 91 3/8 on Friday morning while Nepean, Ontario-based JDS Fitel rose 10 to 70 on the Toronto Stock Exchange.
CS First Boston analyst James Parmelee, who reiterated his "buy" rating on Uniphase, called the deal "a strategic positive." He added in a research note the merger should add to the combined company's earnings immediately.
Merger-related costs will total $2 billion to $2.5 billion with an estimated annual goodwill expense of several hundred million dollars to be amortized over three to five years, he said.
"Management conservatively projects several cents of upside to our fiscal year 2000 (profit) estimates," he said. "Potential exists for more significant accretion in 2000."
Current Wall Street year-end earnings estimates for Uniphase are $1.20 per share in 1999, up 40 percent, and $1.71 in 2000, up 42 percent, according to a First Call survey of analysts.
JDS Uniphase will be quoted on the Nasdaq National Market and will report its financial results in U.S. dollars.
The merged company "will be one of the largest and most advanced optical component and module manufacturers in the world," with pro forma sales of $420 million and 3,600 employees, the companies said in a joint statement.
"By joining forces, JDS Fitel and Uniphase will offer customers increased access to all the key active and passive components and modules used to transmit, route and manage optical signals in fiber-optic networks," the companies said.
Written By Steve Gelsi, CBS MarketWatch