Investment firm Marlin Equity Partners will acquire struggling telecommunications firm Tellabs for $891 million. Marlin will buy each share of Tellabs inc. for $2.45 each, slightly higher than the $2.35 closing price of the stock on October 18. The company to be acquired has roughly 2,100 employees and boasted $75 per share value during its heydays.
Tellabs Inc. that manages traffic for telco companies has been struggling of late with losses posted in the last 11 months as competitions such as Cisco Systems, Alcatel-Lucent, and Huawei Technology outmaneuver it in the market. With the consolidation of Verizon Communications, AT&T, and Vodafone Plc, Tellabs' customer base has been on the decline.
"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," said Simon Leopold, an analyst from Raymond James, in an interview with Reuters.
Amid its struggles, the company tried to diversify by acquiring companies such as WiChorus that manufactures mobile network equipment but to no avail. It also tried to focus on products that helped it to keep up with rivals making most of the demand for mobile internet access and streaming media.
The Naperville, Illinois-based company reported a $7.8 million net loss for the second quarter of 2013, an improvement over the first quarter loss of $55.9 million. The company, which manufactures wireless network hardware and software for telecom providers, reported revenues of $212.1 million and $209.4 million for Q1 and Q2 of 2013, respectively.
Because of its losses, investors and shareholders have pressured Tellabs to sell. As part of the bidding process, several buyers were approached but the company had no leverage to take advantage of and ended up going for a bargain.
"Tellabs' board of directors arrived at the decision to enter into a transaction with Marlin after a thorough review of Tellabs' strategic alternatives and after more than 30 potential buyers, both strategic parties and financial sponsors were contacted as a part of a competitive bidding process," said chairman Vince Tobkin of Tellabs in a statement.
For the buyer, the purchase is another move to get a chunk of sales in the wireless equipment niche. The tender process to buy shares of Tellabs will start on November 1 and is expected to be closed before the end of the year.
"This deal reinforces Marlin's long-term commitment to the telecommunications market sector and the business potential we believe is being driven by the concurrent demand for high-bandwidth mobile, video, and cloud-based services and applications. Tellabs has an exceptionally strong heritage of technology innovation and customer-centric solutions, and we look forward to working closely with the Tellabs team to enhance long-term value for its premier customer base," said Marlin operating partner Pat DiPietro in a press statement.
In December 2012, Marlin purchased optical networks company Nokia Siemens Networks for an undisclosed amount. Last month, it bought bandwidth management firm Sycamore Networks for $18.75 million.
