Are Cyan Shareholders Getting Enough in the Buyout?

By Chris Lange Published May 4, 11:55AM EDT

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Whenever a merger or acquisition comes to the forefront, there is always the question of whether shareholders are getting enough return for having owned the stock. In this case, Cyan Inc. (NYSE: CYNI) is looking to be acquired by Ciena Corp. (NYSE: CIEN). Considering Cyan’s trading history, the question of fair value should be very much up for debate.

Cyan announced that it entered into a definitive agreement to be acquired by Ciena for an aggregate purchase price of approximately $400 million, or roughly $335 million net of cash. Cyan also announced financial results for its first quarter that ended in March.

Upon the closing of the transaction, Cyan shareholders will receive consideration equal to the value 0.224 shares of Ciena common stock. Of this, 89% will be delivered in Ciena common stock and 11% will be delivered in cash based on the value of Ciena common stock at closing.

The board of directors for Cyan has unanimously approved the transaction, which is expected to close in the third quarter. Jefferies is serving as financial advisor to Cyan. Houlihan Lokey Capital also provided financial advice to the Cyan board. Wilson Sonsini Goodrich & Rosati is serving as legal counsel to Cyan.

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Mark Floyd, chairman and CEO of Cyan, commented on the acquisition:

After careful consideration and a comprehensive evaluation of strategic alternatives, our board of directors concluded that the opportunity to combine with Ciena represents the best possible outcome for shareholder value. The transaction has many strategic merits and the stock consideration allows shareholders to participate in potential future combination benefits. Our board of directors believes that being part of a larger, global platform enables the combined company to execute on Cyan’s business more effectively and provides significant value to our customers and shareholders.

At the same time, Cyan announced its first-quarter results as a net loss of $0.14 per share on $36.0 million in revenue. That compared to Thomson Reuters consensus estimates of a net loss of $0.15 per share on $33.33 million in revenue. In the first quarter of 2014, Cyan posted a net loss of $0.33 per share on revenue of $19.04 million.

It is worth noting that this company has been public for roughly two years, and when it came public, the stock was much higher, even breaching the $15 mark, if only briefly. Considering current prices, shares are approximately at a third of their value from two years ago.

There are already a few law firms lobbying on behalf of Cyan shareholders regarding this sale.

Shares of Cyan hit a 52-week high of $4.75 Monday morning. The stock has a consensus analyst price target of $4.00, and the 52-week low is $2.02.

Ciena shares were up 1.2%, at $21.55 just ahead of noon, in a 52-week trading range of $13.77 to $22.94. The consensus price target is $24.95.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.