By Soham Chatterjee
Oct 21 Tellabs Inc, which helps
telecommunications carriers manage traffic on their networks,
said it agreed to be bought by private equity firm Marlin Equity
Partners for $891 million as it struggles against nimbler rivals
and a shrinking customer base.
Marlin offered $2.45 per share, a slight premium to Tellabs'
Friday close, but a far cry from the $75 the stock hit during
the dot-com boom.
The stock was trading around the offer price on Monday
morning and with almost 35 million shares changing hands, it was
the most actively traded stock on the Nasdaq.
Tellabs has posted a loss for eleven straight quarters as it
struggled against competition from Huawei Technology Co Ltd
, Cisco Systems Inc and Alcatel-Lucent SA
It also faced a shrinking customer base due to consolidation
among service providers such as Vodafone Plc, AT&T Inc
and its largest customer, Verizon Communications.
"That combination was lethal for Tellabs," said activist
shareholder Robert Chapman Jr. of Chapman Capital LLC. Chapman
Capital owns less than 5 percent of Tellabs shares.
Tellabs said it marketed itself to more than 30 firms, but
Chapman believes Tellabs did not have much negotiating leverage
given its troubles. Chapman was satisfied with the price
Tellabs on Monday said Michael Birck, its co-founder and
second-largest shareholder, supported the deal. Birck stepped
down as the company's chairman last year, shortly after Chief
Executive Rob Pullen died of cancer.
The company also restructured itself last year to focus on
mobile and fiber optic network products as it sought to compete
with nimbler rivals cashing in on the demand for streaming video
and internet access on smartphones.
"Tellabs has struggled to compete with larger entities that
could or would accept losses and nimbler start-ups with fresher
platforms. Under private equity, we think Tellabs could focus on
re-inventing itself," Raymond James analyst Simon Leopold wrote
in a note.
Marlin Equity has said it intends to consolidate the
fragmented optical networking sector and has snapped up the
optical networking businesses of Nokia Siemens Networks' in
December and of Sycamore Networks in January.
"We view Tellabs' business as an ideal opportunity to
capitalize on the growth in the telecom network equipment
sector," Nick Kaiser, co-founder of Los Angeles-based Marlin
said in a statement.
"It's a very smart deal. Marlin is a company that is going
to be a winner. They are scavenging around like a vulture and
consolidating these small optical businesses and are going to
cut massive expenses," Chapman said.
Goldman, Sachs & Co advised Tellabs, while Credit Suisse and
Evercore advised Marlin.