JDS Uniphase deal meets with
investor approval
Karyn Standen
The Ottawa Citizen
JDS Fitel's stock soared more than 12 per cent on the Toronto Stock
Exchange yesterday as investors continued to give thumbs up to the
Nepean optical switch-maker's merger with California's Uniphase Corp.
JDS Fitel ended the day up $7.40 to a new 52-week high of $67.40.
The shares are now trading at more than five times their Oct. 8 low of
$12.45.
Uniphase Corp.'s shares also skyrocketed, gaining $10 3/8 on the
Nasdaq to finish at $91 1/8. U.S., a 52-week high.
However, while industry watchers widely applaud the deal, saying it
provides the one-stop shopping demanded by telephone-equipment
vendors who need fast access to complex products rather than to
product pieces, analysts are still trying to figure out how shareholders
will be affected by plans to trade the new company on the Nasdaq, and
by the expectation that the wholly owned Canadian subsidiary will
continue to trade on the Toronto Stock Exchange.
A JDS Fitel spokesman said yesterday the company cannot comment
yet on any plans to trade JDS Uniphase Canada shares on the TSE
because of securities regulations.
Under the terms of the merger, JDS Fitel shareholders living in Canada
will receive .50855 shares in the newly formed JDS Uniphase Corp., or
in its Canadian subsidiary, JDS Uniphase Canada.
Current shareholders in the two companies will each own 50 per cent of
the combined entity. The JDS Uniphase Canada shares will be the
economic and voting equivalent of shares of JDS Uniphase's common
stock, which will trade on the Nasdaq.
In fact, the JDS Uniphase Corp. shares that will trade on the Nasdaq,
once the deal is closed (likely in June) will be the renamed Uniphase
Corp. shares now trading on the U.S. exchange, says Konstantin
Kotzeff, JDS Fitel's vice-president of legal affairs.
JDS Uniphase Corp. will be quoted on the Nasdaq and will report
financial results in U.S. dollars. JDS Uniphase Canada shares can be
exchanged on a one-for-one basis for JDS Uniphase shares, trading on
the Nasdaq, at any time, Mr. Kotzeff added.
One of the questions stumping some analysts was whether Canadian
investors will be able to continue holding JDS Fitel stock in their
registered retirement savings portfolios. As analysts pointed out, once
the JDS Uniphase Canada shares are converted into JDS Uniphase
stock (which will trade on the Nasdaq), Canadian shareholders of the
U.S. stock may breach the U.S. content restrictions of their RRSP
portfolios.
However, according to Kevin Li of Toronto's CIBC Wood Gundy
(which advised JDS Fitel's board regarding the proposed deal), "the
shares of JDS Uniphase Canada will trade on the Toronto Stock
Exchange, and for all intents and purposes, it is Canadian property and
can go into your registered retirement savings plan."
Mr. Kotzeff confirmed that Canadians shareholders will continue to be
able to hold shares of the new entity in their RRSP portfolios.
"Canadian shareholders are allowed to take the exchangeable shares of
a wholly owned Canadian subsidiary," he said. "These exchangeable
shares will be shares in a Canadian company, and therefore will
constitute Canadian property for RRSP purposes."
Indeed, considering that the "vast majority" of JDS Fitel shareholders
holding shares that trade on the TSE are Canadian, "this structure was
selected in order to provide shareholders of JDS who are Canadian
residents, Canadian property for their RRSP portfolios," Mr. Kotzeff
said.
There was also the question of whether shareholders of JDS Uni-phase
Canada and of JDS Uniphase Corp. will receive separate financial
documents, such as quarterly and annual reports.
"In general, when you have a merger between a Canadian company and
a U.S. company, they'll have a combined (financial) report," said Kathy
Gay of CIBC Wood Gundy.
However, Canadian companies listed on the Toronto Stock Exchange
must file financial results in Canada, and these include quarterly and
annual reports.
While Mr. Kotzeff would not comment on whether JDS Uniphase
Canada would issue its own financial results, he did say investors will
receive information regarding the Canadian subsidiary. "Shareholders
will have the financial information they need on JDS Uniphase Canada
and on JDS Uni-phase Corp.," he said.
Mr. Kotzeff also confirmed that the share activity of JDS Uniphase on
the Nasdaq will affect trading of JDS Uniphase Canada.
"The shares (of JDS Uniphase and of JDS Uniphase Canada) are the
economic equivalent of each other. The exchangeable (JDS Uniphase
Canada) shares will mirror the JDS Uniphase shares that trade on the
Nasdaq," he said.
While Mr. Kotzeff acknowledged "not every question can be answered
at this time," he pointed out that JDS Fitel has made extensive efforts to
provide shareholders, analysts and the media with as much information
as possible.
"We've had conference calls with analysts, investors and the media," he
said. "In addition, we've had investor meetings in New York, Toronto
and Montreal, and additional conferences are scheduled in numerous
cities in the U.S. The proxy circular that will be issued following
approval by securities regulators will provide a comprehensive and
detailed explanation." |
