Tellabs Inc. has cut the price it is prepared to pay for Advanced Fibre Communications Inc to $1.5 billion from $1.85 billion after AFC reported lower-than-expected profit for the second quarter to June 30, and a component shortage led it to miss a deadline to supply equipment to Verizon Communications.
These problems led Tellabs to review AFC’s financial outlook, and the two companies have reached a new deal that will lead to Tellabs’ stockholders owning 90% of the combined company, and AFC’s the remaining ten percent.
Under the new deal, AFC stockholders will receive 0.504 shares and $12.00 in cash for each share compared with the original offer of 1.55 Tellabs shares and $7.00 in cash. Tellabs CEO Krish Prabhu said the strategic rationale for combining the two companies on the revised terms remains compelling.
The idea behind the merger is that a combination of its bandwidth management and optical transport equipment with AFC’s broadband access equipment will create a product range to tempt telecom service providers. Prabhu said the deal would position the company to grow with its customers in the industry’s sweet spot of broadband services.