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Tellabs $891 Million Purchase Challenged by Investors

Tellabs Inc.’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 suits ask a judge to block the buyout under its present terms and order Tellabs to try to get a better price for shareholders.

Tellab’s board only agreed to the buyout after conducting a “thorough review” of options for the telecommunication company and shopping it to more than 30 potential buyers, George Stenitzer, a Tellab spokesman, said in an e-mailed statement. “We believe these suits are without merit,” Stenitzer said.

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).

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