The Deal: Marlin Equity Pays $891M For Tellabs

NEW YORK ( TheStreet) -- Marlin Equity Partners agreed to take struggling wireless network provider Tellabs ( TLAB) private for about $891 million in cash.

The buyer is going to pay Tellabs shareholders $2.45 per share in cash valuing the target's equity at around $871 million. The purchase price represents a 4.3% premium over Tellabs' Oct. 18 closing stock price of $2.35.

Naperville, Ill.-based Tellabs, with its approximate 2,100 employees makes wireless network equipment and software products for major telecom providers including AT&T ( T), Clearwire ( CLWR) and Swisscom.

Tellabs has been under pressure from activist shareholder Dialectic Capital Management to sell itself as it has been losing money for the past several quarters.

For this year's second quarter, the company had a net loss of $7.8 million on revenues of $212.1 million, down from a loss of $55.9 million in the first quarter on revenues of $209.4 million.

Tellabs ran an auction process as a result of investor pressure.

"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 Tellabs' chairman Vince Tobkin in a statement.

The transaction is expected to close by the end of the fourth quarter and is not subject to any financing conditions. Marlin is going to begin the tender process to acquire Tellabs' shares by Nov. 1.

Tellabs' co-founder and second largest shareholder, Michael Birck, said he supported the transaction. Dialetic also said it was "pleased" with the deal.

For Marlin, the acquisition is another sector move as demand for wireless equipment continues to rise.

"We are excited to back the Tellabs team and we view Tellabs' business as an ideal opportunity to capitalize on the growth in the telecom network equipment sector," said Marlin partner Nick Kaiser in a statement.

In December, the Los Angeles private equity firm bought Nokia Siemens Networks optical networks operations for undisclosed terms. Last October, Marlin acquired Sycamore Networks ( SCMR) bandwith management business for $18.75 million.

Tellabs has to pay a $26.72 million termination fee to Marlin if it decides to call off the purchase.

Goldman Sachs and Sidley Austin advised Tellabs.

Credit Suisse and Evercore Partners advised Marlin, which was represented by Schulte Roth & Zabel.

Tellabs shares opened 4% higher to $2.44 on Monday morning, giving it a market capitalization of about $870 million.

-- Written by Demitri Diakantonis in New York

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