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Question:

Ocli has cancelled the 2:1 stock split (unfortunate news)

However, JDSU has not cancelled their 2:1 split with a record date of 12/17/99 and a pay date of 12/29/99.

Per the terms of the JDSU purchase, will we be seeing 1 OCLI = .928 JDSU at JDSU post split price? In other words will OCLI stock be revalued at .928 ( $97.00 = approx. post split price) or .928 ($197.00 = approx. current JDSU price).

I will call investor relations at OCLI Monday to pose the question. Looks like we may have been "duped" on this...I have to think that the "valuation factor of .928 looked reasonable several months ago when this purchase was initiated and still in discussion, but the stock prices have really changed in the last 2 months, especially OCLI.

So, the BIG QUESTION is: which JDSU price will apply?
Agreement to be finalized 1st qtr. 2000, and JDSU to split before end of Dec.'99. How will OCLI be valued?
1 OCLI = .928 ($197.00 currently) or 1 OCLI = .928 ($97.00 post split price). Both JSDU prices are just approximations based on last closing price, but you can see the scenario here...

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sallyhday, you wrote:

Ocli has cancelled the 2:1 stock split (unfortunate news)

Why is this unfortunate news? Does value of company change? Is twice as many shares at half the price worth more? Will institutions jump to buy 2000 instead of 1000 shares?

JDS has agreed to pay a certain value for OCLI. Splitting JDSU stock to pay less not possible any more than executives at OCLI splitting that company's stock to make more.

solocam

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Thank you for your reply.

Twice the number of OCLI shares at .928 (JDSU) would have been VERY VERY beneficial to current OCLI shareholders.

But, the question still remains: Will JDSU continue with their scheduled 2:1 stock split? If so, will their "split price" be used to adjust the .928 JDSU = 1 OCLI valuation?

If so, OCLI shareholders just lost a good thing...Our stock has been running based on current value of JDSU ($197.00 11/5 closing), and I am not convinced that this valuation factor may not be applied (in 1st qtr. 2000) based on the split adjusted price of JDSU.

I hope I am wrong...I pray I am wrong...I will post any info I can get from a call to investor relations at OCLI on Monday morning.

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It's .928 share of JDSU for 1 share of OCLI as of the time of the announcement.If you look at the price of both stocks the are trading in sync now.
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Thank you for your post. I will post Monday with any add'l information I can get from OCLI finance people.

I hope you are right. But, I will feel better once I know that this .928 valuation will not be affected by the JDSU split on Dec. 29,1999.

Any other thoughts, or facts, please advise. Looking for any positive information so I can add to my holdings.

Congratulations to all LONGS on OCLI! Hope this deal goes through...
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Hi Sally

New to this board (just looking to see about getting into JDSU a little cheaper). You will be happy to know you are wrong on this. Had the same issue when ASND was bought by LU.

The deal announced is exactly as it says. Each share you currently own will be changed to .928 of JDSU when the deal closes. This rate is set with the current number of JDSU shares. Therefore if they split you will get 2 x .928 (1.856) shares of JDSU.

The reason it is cheaper now than JDSU (ie not quite lockstep at .928) is the potential that the deal wont go through. You can try to exploit this if you want but the risk is that the deal falls through.

Anyway Ill keep reading to learn a bit more about JDSU so I can decide if I want to invest. If so Ill probably do it via OCLI to take advantage of the "arbitage play" which reflects the difference in price between the two since based on their prior relationship it seems that this deal will likely go forward.

On another note hi Fred, why didnt you tell me about this on the Lipo board (nice to see you have one big winner)

Jeff
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interestingly enough, in saturday's edition of investor's business daily, william o'neil speculated that jds uniphase might be ripe for an "exhaustion gap" top, wherein the stock surges, finally gapping significantly higher on heavy volume (opening bid price higher than previous day's closing price), before collapsing and deflating. don't know if this is hot air or not, but it might be worth staying alert for.

jeff - nice to see you. i bought ocli about 3 weeks ago because of foolish fundamentals combined with a good looking chart from a technical analysis perspective. the jds uniphase stuff was serendipity (=dumb luck, but i'll take it). be interested to hear your response to my last lipo post.

sally - good question, though jeff seems to know from experience what to expect. i'd still love to hear how your conversation with investor's relations goes. i'd say, "of COURSE we get split adjusted pricing," but, as deeniebee pointed out, i'm sometimes wrong. (oops).

fred
"caveman2"
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Thank you for the recent posted info. I will post any useful information I can glean from a call to Investor Relations at OCLI (Monday morning).

Jeff - I HOPE YOU ARE RIGHT!!! I would hate to see .928 split adjusted valuation for OCLI. I checked JDSU boards,etc. but no mention of JDSU cancelling, or delaying their 2:1 split.

I still have a question: If 1 OCLI= .928 JDSU, what "date" is used to determine the valuation? The stocks are in "step" with each other (based on the news) but I understand that the deal (if approved) won't close until 1st qtr. 2000. If JDSU stock price falls, or if we do see a split-adjusted price, what is the "net" result to OCLI shareholders? Does the "announcement date" mean anything? Or, does the final "acquisition date" determine the calculation? I would like to add to my OCLI position, but I am looking for assurance that, somehow, JDSU CANNOT use a split-adjusted valuation factor.

I appreciate everyone's patience...I have never encountered a situation like this one. It is confusing and exciting! Even my ML broker can't give me a reasonable answer!!! Thanks all! EOM
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caveman, glad you brought up "exhaustion gap" possibility 'cuz I have been worried about something like this and did not want to worry anyone until I dug a little deeper into JDS.

I have to admit I see that possibility, tho. Recent price rise in JDS is too steep to maintain. Whether it levels or falls depends on the tea leaves. Company vastly overvalued for present earnings but Wall St. obviously banking on future and JDS is big fiber-optic play, especially with institution growth funds.

For a quick scope of JDS, here are 2 links I use before actually plugging in the numbers and doing the math:

MSN Moneycentral Research Wizard- click Next to continue through entire series on company
http://moneycentral.msn.com/investor/research/wizards/srwfund.asp?Symbol=JDSU&iPage=qd

Quicken Stock Evaluator- especially check out cash flow vs. revenue and the Intrinsic Value page
http://www.quicken.com/investments/stkeval/?symbol=JDSU


Hope someone finds these interesting.

Sally, I also would be very appreciative of any discussion you have with OCLI on this deal.

solocam
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Solocam -

I will post any information I receive. I plan to call OCLI in the morning (Monday). I will also be watching any pre-market trading on OCLI. If nothing "dramatic" occurs in the next few days, and volume stays "up", I have to believe that the institutions have considered my same questions and possible scenario.

Good luck to everyone! I hope our faith in OCLI will lead us to a successful conclusion by 1st qtr. 2000.
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THe date of valuation will be the date of close (again went through this before).

For those who havent been through this before (oh yeah such experience Ive been through it twice with ASND and LU and XCIT and ATHM) you will notice an ongoing gap in the stock prices. They wont quite be lockstep but will trend together. Note can go both up or down. As the deal comes closer and closer the price will move closer and closer to the actual .928 value (or 1.856 post split). You should also note that fractions of shares you get $ for. i.e. you own 10 shares get 9 of JDSU plus .28 x the stock price.

For what it is worth you should also note that the brokers sometimes get a bit confused. When this same situation happened to XCIT shareholders plenty of them had their broker tell them they had half the # of shares that they were supposed to have. Dont worry it will all work out but you may need to mention it to them so you should watch closely.

Has anyone every suggested you worry too much :-). Of course you shouldnt just trust me, but I have no doubt that OCLI will comfirm this for you.

Good luck
Jeff
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Hello everyone,

acv is correct. When JDS Uniphase completes its split, you will get twice as many shares as is currently "published". (Would the executives of OCLI -- who own 7.1% of the company -- want to see their shares suddenly get half credit in a merger?)

In addition, there is a gap in the current prices because of two main reasons, one of which acv points out.

As acv points out, the deal may not go through and the gap partially represents Wall Street's assessment (through arbitrage) just how likely the deal is to clear.

Second, part of the gap is simply due to the Time Value of Money. Suppose there is a hypothetical deal where company X buys company Y for $100/share. If a deal is arranged to give you 100 dollars a share sometime in the next quarter, you are not going to pay 100 immediately -- even if it is certain to close. Why? Cuz, you could put 98 dollars or so in a Treasury Bond now and get that same 100 in the first quarter of 2000. (So why put it in a risky stock arbitrage situation if you can get such a result in a safe Treasury at a lower price?) (Remember, this is only part of the price discrepancy and most of the fluctuation will result from the first reason.)


Here is a clip from the SEC filing by JDS Uniphase available at http://www.freeedgar.com

Nepean, Ontario, San Jose, California and Santa Rosa, California - November 4, 1999 - JDS Uniphase Corporation (Nasdaq: JDSU and TSE: JDU) and Optical Coating Laboratory, Inc. (OCLI) (Nasdaq: OCLI), announced today the signing of a definitive agreement for the companies to merge in a transaction that will solidify their long-standing partnership.

The agreement provides for the exchange of 0.928 shares of JDS Uniphase common stock for each outstanding share of OCLI and is valued at approximately $2.8 billion. Closing of the transaction in the first calendar quarter of 2000 is anticipated, subject to certain closing conditions, including the obtaining of required clearances under the Hart-Scott-Rodino Antitrust Improvement Act, other governmental approvals and the consent of OCLI stockholders. Following completion of the transaction, OCLI will operate as a wholly owned subsidiary of JDS Uniphase.

Using the announcement and doing some math we can verify the split answer.

There are currently 14,160,066 shares outstanding of OCLI. They are being turned in at a ratio of .928 when JDSU is at 197. So...

14,160,066 * .928 * 197 = $2,588,686,625 and change.

This is approximately what the press reports state. (The discrepancy is due to (1) absorption of debt and (2) stock options that OCLI employees currently have which will be converted or exercised and paid out to the OCLI employees who own them.)

Now, suppose that JDSU splits and b/c splits cannot impact firm value by definition, lets see what we have to get. $2.6 billion must equal 14,160,066 * (Share exchange ratio) * (197/2)

So, $2,588,686,625 = exchange ratio * 1,394,766,501

$2,588,686,625/1,394,766,501 = 1.856...


There's the answer. Hope this helps!

Jeff
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Thank you for all that hard work.

You have to admit that it has been confusing for those of us who have not seen this scenario before. And, it is o.k. to "worry" while you gather the facts. It is usually better to err on the side of caution.

If your assessment is indeed correct (again, thank you) then we should all be o.k. and the end "net" result should be the "same" to all of us. The OCLI split cancellation came as a big surprise. No mention of JDSU split made things look "different".

Again, thank you for your post!
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Its really not that hard. You know the old story, someone did the same for me what seems like ages ago. Nice to be able to return the favor.

As an FYI if you like a post you can click on the little recommend button (sort of a pat on the back of sorts), if you really like the poster you can press the smiley face and they will be part of your favourite fools list. On the other hand if you dont like them and want to ignore them you can press the sad face.

Also you might want to fill in your profile, tells others a little about yourself which sometimes makes it easier to converse about stocks and makes it seem a little more friendly I think.

Have a good day, dont forget to call Investor relations it will make you feel better.

Jeff
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Jeff-

Thanks again for the information. Your calculations appear to be correct. Saw the same info posted at the AOL OCLI boards. Apparently, someone did get through to Investor Relations today. I'm still waiting for a call back.

The pull-back today doesn't alarm me, as this was to be expected. Sure hope JDSU stays "healthy" for our sake.

Best of luck. Again, thanks for your patience and for educating any of us who were "worried".
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keep yer eye on acv - he generally knows of what he speaks.

fred
"caveman2"
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