The networked communications specialist was sailing along with the market for the first three weeks of May. Then the company announced a merger with privately held sector peer GENBAND, and share prices fell more than 13% over the next two days.
The deal is expected to close in the second half of 2017, unlocking more than $40 million in annual cost synergies and an immediate boost to Sonus' bottom-line earnings. At the same time, the all-stock agreement will also dilute the holdings of current Sonus shareholders by roughly 50%. The combined company looks like a stronger competitor than either of its halves could be on its own, and might even attract buyout offers from large telecoms or cable companies.
Buying in at today's low prices makes a lot of sense to me, because the upcoming dilution has already been priced into Sonus shares.