The USD891 million acquisition undertaken by Marlin Equity Partners over Tellabs Inc is now subject to two derivative suits filed by investors of the telecommunications networking products firm. It had accused Tellabs of breaching its fiduciary duty by favoring insiders instead of its shareholders.

The Naperville, IL company announced last October 21 that it would be purchased by the Los Angeles, CA based equity firm for USD2.45 per share in cash. The offer included a 4.3% premium over the prevailing market price of the shares.

According to the suit, the transaction 'undervalues Tellabs intrinsic value' and further alleged that insiders, such as directors and managers, would 'receive over USD110 million from the deal' through illuquid assets like stock options and restricted shares. These were the allegations filed by the City of Lakeland Employees Pension Plan in its suit filed in Cook County Illinois Circuit Court.

In his suit, Tellabs shareholder Robert Englehart said that the Tellabs board agreed to 'a flawed and deficient sales process' involving ' inadequate consideration.' He further said, "Stockholders will forever be prevented from realizing the true value of their investment."

The two lawsuits sought to have the court issue a restraining order on the buyout under its present terms and order renegotiation for better consideration and value.