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Tellabs reprices Ciena
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August 28, 1998: 3:00 p.m. ET
Tellabs renegotiates Ciena merger; telecom equipment firm to pay $4.7B
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NEW YORK (CNNfn) - Undeterred by weak earnings and the loss of one of Ciena's biggest potential customers, Tellabs Inc. said Friday it will carry through with plans to buy Ciena Corp., albeit at a renegotiated purchase price.
Lisle, Ill.-based Tellabs will buy fellow telecommunications-equipment maker Ciena in a $4.7 billion stock deal. Both companies' boards have approved the transaction.
Under terms of the deal, Tellabs will swap 0.8 shares for each outstanding Ciena share.
The deal values Ciena shares at $46.25, based on Thursday's Tellabs close.
Tellabs said it expects the revised merger agreement to dilute its 1998 and 1999 earnings more than the original deal would have. The company said 1998 third-quarter earnings might be reduced by 5 to 6 cents a share and that fourth-quarter earnings might be cut by 2 to 4 cents a share.
In the worst-case scenario, Tellabs said, full-year 1999 earnings may be diluted by as much as 15 cents a share.
Under the original merger terms, Tellabs had expected 1998 earnings to be diluted by 5 to 6 percent and had foreseen no impact on 1999 earnings.
According to First Call, analysts currently expect Tellabs to earn 47 cents a share in the third quarter, up from 34 cents a year earlier, and 57 cents in the fourth quarter, compared with 42 cents a year ago. Full-year 1998 earnings are seen at $1.86 a share, up from $1.42 in 1997, and 1999 earnings are forecast at $2.36.
Nonetheless, Tellabs hopes the deal will put it in a better position to take on larger rivals Lucent Technologies Inc. (LU) and Canada's Northern Telecom Ltd. (NT).
Tellabs agreed to acquire Ciena in June in a 1-for-1 stock swap valued at the time at $6.9 billion.
But half an hour before shareholders were set to vote on the transaction, Ciena announced that AT&T Corp. would not buy certain Ciena technology. AT&T, Ciena said, had decided to stop evaluating Ciena's multiplexer technology, used to boost the capacity of fiber-optic lines.
The announcement came a week after Ciena warned that third-quarter profits would fall more than 50 percent, missing expectations. Subsequently the companies postponed the merger.
Shares of Ciena (CIEN) climbed 4-7/16 to 35-1/4 in afternoon trading on the New York Stock Exchange. Tellabs shares (TLAB) were off 8-1/2 at 49-5/16. 
-- from staff and wire reports
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