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NEW YORK (TheStreet) -- Investment firm Marlin Equity Partners will acquire Tellabs (TLAB)  in a deal worth $891 million, or $2.45 a share, a 4.3% premium on Friday's closing price. The board of Tellabs, the telecommunications company, unanimously approved the acquisition, which is expected to close in the fourth quarter.

"This transaction will deliver to Tellabs stockholders certainty of value and liquidity, immediately upon closing," said Chairman Vince Tobkin. "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 part of a competitive bidding process."

Shares rose more than 5% to $2.47 on Monday afternoon. The deal is seen as a lifeline for the phone equipment developer which has reported 11 consecutive quarterly losses.

The company has had a volatile year-and-a-half as two chief financial officers left successively within a month of one another, Chairman and co-founder Michael Birck retired and CEO Rob Pullen lost his battle with cancer.

TheStreet Ratings team rates Tellabs Inc as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:

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TheStreet Recommends

"We rate Tellabs Inc (TLAB) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 66% when compared to the same quarter one year ago, falling from -$4.7 million to -$7.8 million.
  • Net operating cash flow has significantly decreased to -$16.8 million or 152.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Communications Equipment industry and the overall market, Tellabs Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • 41.49% is the gross profit margin for Tellabs Inc which we consider to be strong. Regardless of TLAB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TLAB's net profit margin of -3.67% significantly underperformed when compared to the industry average.

Written by Keris Alison Lahiff.