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Why Sonus Networks, Inc. Fell 12% in May

By Anders Bylund – Jun 6, 2017 at 9:00AM

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A merger of equals with sector peer GENBAND drove share prices way down overnight. Would this be a good time to buy in?

What happened

Shares of Sonus Networks (RBBN -1.71%) fell 12.1% in May 2017, according to data from S&P Global Market Intelligence.

So what

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.

Businessman juggling several modes of modern communications.

Image source: Getty Images.

Now what

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.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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