Slightly sour puss spin from Briefing:
TELLABS INC. (TLAB) 65 7/8 CLOSED.
In a merger of equals, two telecommunication equipment makers have agreed to combined their operations in a $7.1 billion stock swap deal.
Obviously, some investors were let in on the merger deal earlier than most as shares of Ciena Corp. (CIEN 57 9/16) rose yesterday more than 6 points ahead of the this morning's merger announcement. The little guy always gets left out. Ciena has been rumored to be on the block for some time as larger players have emerged in their field of work for providing increased fiber-optic networks capacity without needing to lay down more cables. Particularly with Lucent Technologies (LU 71 11/16) and Northern Telecom (NT 74 3/8) expressing greater interest in this burgeoning field, Ciena was bound to face greater competition sooner or later. The combination with Tellabs should add value to the new merged company as each side brings something to the table as the demand for build high-capacity networks to handle voice, data and video remains very strong. According to terms of the deal, Tellabs will exchange one TLAB share for each Ciena share. Thus, Ciena shareholders will receive a 14.4% premium in this exchange. Excluding expected one-time transaction charges, the merger is expected to be slightly dilutive to 1998 earnings, but no dilution is expected to occur in 1999. Tellabs has been active in filling the holes in its product offerings as last month the company closed its deal to acquire Coherent, a maker of "echo-cancellation" and conferencing gear for telecom carriers, in a deal valued at $800 million. This latest merger deal makes sense for both sides and should receive a warm reception from Wall Street.But with Ciena stock rising by more than 12% yesterday, some investors will end up making more than others.
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