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Coherent shares soar
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February 17, 1998: 12:37 p.m. ET
Telecom equipment maker gets boost after accepting $670M Tellabs buyout
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NEW YORK (CNNfn) - Shares of Coherent Communications took off in early trading Tuesday after the telecommunications equipment maker agreed to be bought by rival Tellabs for $670 million in stock.
The companies announced the deal Monday.
Terms call for Lisle, Ill.-based Tellabs to swap 0.72 share of its common for each Coherent share. Coherent is based in Ashburn, Va.
Coherent (CCSC) shares rose 8-3/8, or 25 percent, to 40-3/8 at the opening of Nasdaq trading Tuesday, and were up 7 to 39 at midday. Tellabs (TLAB) stock was off 2 at 55 15/16.
Executives said the deal will create synergies between Coherent's access to global markets -- about 75 percent of its sales are to overseas customers -- and Tellabs' size and strength in North America.
"The combination should result in innovative new speech enhancement products for both markets," said Michael Birck, chief executive and president of Tellabs.
"In this era of convergence in the telecommunications industry, the ability to bring the latest technology to global customers in the shortest possible time is the key to growth," he added.
Aside from one-time charges of 2-3 cents a share from the deal, the two companies said they expect modest accretion in earnings per share over the next two years.
Coherent sells echo cancelers, which improve speech levels in various telephone networks, to telecom giants AT&T and British Telecom, among others. The deal is expected to lead to the development of new products.
Tellabs expects to play a role in the potentially enormous market for Voice Over IP, which allows voice communication over the Internet, according to spokesman Tom Scottino.
The industry is dominated by AT&T spin-off Lucent Technologies. Among the market's big drivers is digital wireless communications, said Scottino.
Tellabs had 1996 revenue of $869 million and Coherent revenue totaled $54 million. 
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