September 7, 2000
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JDS Uniphase Sees $410M SDL Merger-Related Costs
Dow Jones Newswires
WASHINGTON -- Fiber-optic components maker JDS Uniphase Corp. (JDSU) expects to record $410 million in merger-related costs and take a $148.6 million in-process research and development charge for its pending $41 billion acquisition of SDL Inc. (SDLI).
According to a registration statement filed Thursday with the Securities and Exchange Commission, JDS Uniphase expects to take the research and development charge in the quarter the merger closes.
The deal, to be accounted for as a purchase, was originally expected to close by the end of December. Despite a second request for information Aug. 24 from the U.S. Department of Justice, which is reviewing the transaction on antitrust grounds, the companies reiterated they continue to expect to complete the deal in the fourth quarter.
SDL expects to incur about 40 million in direct transaction costs in the quarter the merger closes.
Under the terms of the deal, announced July 10, each share of SDL will be exchanged for 3.8 shares of JDS Uniphase. The transaction at the time of the announcement valued SDL shares at $441.5125 a share.
Shares of SDL were recently trading at $384.75, up $8.13, or 2.16%, on volume of 361,400 shares. Average daily volume is 4,853,909 shares.
Of the estimated $40.5 billion purchase price, JDS Uniphase estimated in its SEC filing that the acquisition of SDL will create roughly $38.2 billion in goodwill and other intangibles.
JDS Uniphase said intangible assets, including $37.44 billion in goodwill, will be generally amortized over a five-year period, and deferred compensation, totaling $1.59 billion, will be amortized over the remaining vesting period - up to four years - of the unvested SDL stock options assumed by JDS Uniphase.
If goodwill and other intangible assets were amortized in equal quarterly amounts over a five-year period after completion of the SDL merger and deferred compensation was written off over the remaining vesting period of the options, JDS Uniphase made a preliminary estimation that the related accounting charge for these items would be about $2.1 billion per quarter and $8.4 billion per year in the year after the merger's close.
JDS Uniphase said in the filing that an unspecified independent valuation specialist performed an allocation of the total purchase price for SDL to its individual assets.
JDS Uniphase expects to amortize $506.2 million in SDL's existing technology, consisting of technologically feasible products in most of the company's product lines, over a straight-line basis over an average estimated remaining useful life of 5 years.
According to the filing, JDS Uniphase anticipates writing off about $175.6 million in acquired core technology on a straight-line basis over an average estimated remaining useful life of 5 years. The acquired core technology includes SDL trade secrets and patents in the design, package and manufacture of laser components and modules for fiber optic telecommunication networks.
Roughly $40.8 million for SDL trademarks and trade names will be amortized on a straight-line basis over an estimated remaining useful life of five years.
About $36.1 million for SDL's assembled workforce, consisting of more than 1,618 skilled employees, will be written off on a straight-line basis over an estimated remaining useful life of four years.
JDS Uniphase said in its SEC filing that SDL's current research and development efforts have focused on the following principal products: pump laser chips, pump laser modules, Raman chips and amplifiers, external modulators and drivers and industrial products.
The development of SDL's pump laser chips, used to provide power to optical amplifiers in fiber-optic systems, is in a development cycle that is expected to be completed in the fourth quarter and first quarter of 2001. JDS Uniphase said that development costs incurred to date total about $900,000, with an additional $900,000 necessary to complete the development cycle.
Development of SDL's pump laser modules is scheduled to continue for another 11 months and is expected to be completed in the third quarter of 2001. JDS Uniphase said in the SEC filing that development costs to date are about $2 million, with an additional $2.3 million estimated to be necessary to complete the project.
JDS Uniphase said that SDL's development of Raman chips and amplifiers, a fiber-optic transmissions systems technology, is expected to continue for another five to eleven months. Completion dates for the project started in the first quarter of 2001 and ended in the third quarter of 2001.
According to the filing, development costs incurred to date are about $2.3 million with an estimated $6.4 million necessary to complete the project.
SDL's external modulators and drivers, used in high channel count systems with long propagation distances, have a development cycle of two to thirteen months. The company incurred development costs to date of $300,000 and estimated $4.2 million as necessary to complete the project.
JDS Uniphase said SDL's industrial products, including printing and materials processing applications, have a current development cycle of another four months. It said $2.1 million in development costs were incurred to date and estimated $600,000 as needed for completion of the project. |
