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Tellabs $891 Million Purchase Challenged by Investors

Tellabs Inc. (TLAB)’s $891 million acquisition by Marlin Equity Partners was challenged by investors in two lawsuits accusing Tellabs of favoring insiders over stockholders.

Tellabs, a telecommunications networking products company based in Naperville, Illinois, said Oct. 21 it would be bought by Los Angeles-based Marlin for $2.45 a share in cash, a 4.3 percent premium at the time.

The transaction “undervalues Tellabs intrinsic value,” and insiders including directors and managers “will receive over $110 million from the deal” with otherwise illiquid assets such as stock options and restricted shares, lawyers for the City of Lakeland Employees Pension Plan said in a lawsuit filed Oct. 22 in Cook County, Illinois, Circuit Court.

Tellabs’ board agreed to “a flawed and deficient sales process” involving “inadequate consideration,” stockholder Robert Englehart contends in a companion case in the same court. “Stockholders will forever be prevented from realizing the true value of their investment,” he said.

Both lawsuits ask a judge to block the buyout under its present terms and order Tellabs to try to get a better price.

Tellabs spokesman George Stenitzer didn’t immediately return an e-mailed message seeking comment on the lawsuits.

The cases are City of Lakeland Employees Pension Plan v. Tellabs Inc., 13CH23890, and Robert Englehart v. Bo Hedfors, 13CH23886, Circuit Court of Cook County, County Department, Chancery Division (Chicago).

To contact the reporters on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net; Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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