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Technology Stocks : JDS Uniphase (JDSU)
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To: H Adams who wrote (4885)1/20/2000 7:53:00 PM
From: t2  Read Replies (1) of 24042
 
H.Adams, Normally when such a large premium is paid for a stock and later the deal does not close, the acquired stock will tank! Right now ETEK should trade in line with JDSU but for the possibility of the deal not to close. The discount is quite high because if the deal was to close today---ETEK would be worth about 262. The discount only exists due to the chance of the deal not going through. It was about 10% on the OCLI deal until the regulatory approval was obtained. However, no one questioned any regulatory problems with that deal and still it trading at a discount because other things could have gone wrong as well---who knows. Now the risk is gone and so is the bargain price.

In the case of ETEK, the government scrutiny will be somewhat more and therefore market prices in a higher discount until an approval is obtained. This is likely to happen but you never know.

If JDSU had never offered to take over ETEK, where would that stock trade given the run up in the sector. I would think it would have moved a bit like SDLI and could have reached 200 on its own by now--with a stock split etc. Now if as i said, the whole sector moves in step in JDSU, I would think the current discount in the ETEK stock price is too high and be willing to take a chance holding it. It is just my opinion of what i feel the risk is in being an ETEK shareholder if goverment blocks the deal. I think the market is factoring in too much risk but it is only my opinion---maybe the market know better.
I think the media played the antitrust concerns more than was warranted given NT/Alcatel/LU' s in house component capabilities.
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