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Tom Sandell Goes Activist on JDS Uniphase Corp (JDSU) and Urges the Board to Seek Value from Tax Assets

In a filing with the Securities and Exchange Commission, Tom Sandell‘s Sandell Asset Management issued a press release in which it outlined its position regarding JDS Uniphase Corp (NASDAQ:JDSU). Being a shareholder with a significant position, Sandell Asset Management considers that JDS Uniphase should sell its Communication and Commercial Optical Products (CCOP) business through a formal auction. In addition, the company should seek measures to unlock more value associated with its tax assets.

Thomas Sandell

Sandell owns around 4.20 million shares of JDS Uniphase Corp (NASDAQ:JDSU), held through several affiliated funds, which is why, the investor has not revealed a stake in the company in its previous filings. The stake is worth $55.30 million at the current price of the stock. Sandell considers that the current value of the stock does not reflect the value of the company’s tax assets represented buy federal, state, and foreign tax net operating loss carryforwards worth around $6.1 billion, $1.8 billion, and $1.0 billion respectively. This represents a tax-effected book value of over $2.3 billion, and would add another $10 to the company’s stock price.

Therefore, as Sandell stated in his letter attached to the press release, if the board of the company decides to pursue measures to unlock this value from tax assets and to sell its CCOP business, the price of the stock will have the potential to climb to a range between $19 and $26 per share, which represents a significant premium above the current price of the stock.

The company has previously announced that it plans to spin-off its CCOP business, which is expected to be completed by the third quarter of 2015. However, while Sandell salutes the decision to separate the business, he still considers that there are buyers who might be interested to acquire it, which is why the company should initiate an auction and in the meantime keep pursuing the spin-off process.

With the stock of JDS Uniphase Corp (NASDAQ:JDSU) remaining flat since the beginning of the year, and dropping by over 13% over the last year, the company should consider Sandell’s proposals if they can really increase the shareholder value of the company and raise the stock price.

Aside from Sandell, several other investors among those tracked by Insider Monkey, several disclosed stakes in JDS Uniphase Corp (NASDAQ:JDSU), Dan Loeb‘s Third Point initiated a stake in the company with 2.50 million shares. Steve Cohen‘s Point72 Asset Management is another shareholder of the company with 1.14 million shares.

Disclosure: none

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