Tellabs agrees to be sold to private equity firm Marlin Equity Partners for $891 million

NAPERVILLE, Ill. – Communications equipment maker Tellabs has agreed to be acquired by investment firm Marlin Equity Partners for $891 million.

The deal calls for Marlin to buy all of Tellabs Inc.’s shares for $2.45 each in cash. This is a 4 per cent premium to its Friday closing price of $2.35.

Shares of Tellabs climbed 11 cents, or 4.7 per cent, to $2.47 in afternoon trading on Monday.

Earlier this year Tellabs announced layoff plans as it said it would stop development of a new line of routers amid declining sales. The company has posted annual losses for the past two years, and analysts polled by FactSet expect another loss in 2013.

There’s also been a lot of management upheaval. In July 2012 the company announced that CEO Rob Pullen had died of cancer. Then in August of that year Chairman and co-founder Michael J. Birck told shareholders in a letter that he has an incurable, rare form of leukemia and would step down after its spring 2013 annual shareholders meeting.

And in May of this year Chief Financial Officer Andrew Szafran announced that he was resigning for personal reasons.

Tellabs Chairman Vince Tobkin said Monday that the board decided to sell the Naperville, Ill., company after looking at its options and after contacting more than 30 potential buyers as part of a competitive bidding process.

Marlin Equity Partners partner Nick Kaiser said plans include making “significant investments in research and development” at Tellabs.

A tender offer is expected to begin by Nov. 1.

Simon Leopold of Raymond James said in a client note that he wasn’t surprised by the announcement of the sale and doesn’t expect counterbids for the company.

“We have struggled to identify a suitable strategy for a Tellabs turnaround following a series of missteps and unfortunate events,” Leopold wrote.

The analyst said that by selling itself to a private equity firm, Tellabs can concentrate on reinventing itself.

Leopold reaffirmed a “Market Perform” rating.

The deal, which was unanimously approved by Tellabs’ board, is expected to close during the fourth quarter. It requires at least half of Tellabs’ outstanding shares to be tendered.